Genesis Settles US$ 1 Billion 3AC Claims for US$ 33 Million Amid Bankruptcy Proceedings

Settlement to pay 96.7% less than claimed

Genesis, a bankrupt cryptocurrency lending firm, has reached an agreement to resolve claims worth US$ 1 billion (AU$ 1.57 billion) from the now-defunct crypto hedge fund Three Arrows Capital (3AC). According to court documents, this settlement will involve a payment of US$ 33 million (AU$ 51.84 million) by Genesis.

3AC, which collapsed in June 2022, caused a series of troubling events in the crypto market, often referred to as the ‘crypto winter.’ The claims made by 3AC against Genesis are related to transactions that occurred before Genesis declared bankruptcy in January. The proposed settlement, detailed in a filing from November 9, is the result of comprehensive negotiations between Genesis and 3AC. Genesis is now seeking approval from a New York bankruptcy court to finalise and proceed with this settlement.

The motion is filed by Genesis Debtors for approval of a settlement agreement with the joint liquidators of Three Arrows Capital Ltd (3AC), a party in liquidation. This is part of their Chapter 11 bankruptcy proceedings.

Settlement Agreement and Context

Three Arrows Capital Ltd. (3AC) holds an allowed general unsecured claim against Genesis Global Capital LLC, valued at US$ 33 million (AU$ 51.84 million). There is a mutual agreement for the release of liabilities between the Genesis Debtors and 3AC, according to the documents filed. 

The settlement includes specific provisions concerning the cooperation between the involved parties, management of certain digital assets like AVAX and NEAR tokens, and stipulations for the transfer of the approved 3AC claim. The Genesis Debtors filed for Chapter 11 bankruptcy on January 19, 2023. This case encompasses a range of complex transactions and claims associated with digital asset lending and borrowing services.

It might seem unusual for Genesis to settle for a significantly lower amount than the claim, and this decision is likely influenced by a mix of legal strategy, financial considerations, risk management, and the specific circumstances of the bankruptcy proceedings. Ram Ahluwalia, Lumida, CFA charter holder thought so too, especially considering allegations or implications of fraudulent activity on the part of Three Arrows Capital.

A hearing is scheduled for November 30, 2023, with an objection deadline of November 24, 2023.