FTX and Genesis Reach $175 Million Settlement, Resolving Complex Dispute

Genesis agrees to pay $175 million to FTX, aiming to smooth the path to bankruptcy confirmation and eliminate risks of prolonged litigation.

FTX and Genesis reached an agreement to settle their complex legal dispute. Genesis will pay $175 million to Alameda Research, a move aimed at smoothing the path to confirming its bankruptcy plan.

Background of the Dispute

The legal battle between FTX and Genesis has been a convoluted one, involving intertwined loans and customer claims. FTX originally filed a claim against Genesis in May, amounting to almost $4 billion. Genesis had also asserted claims against FTX, including $176 million in customer claims. The situation became more complicated after Genesis filed for bankruptcy, following a financial hit caused by the collapse of FTX last year. Both entities had a history of providing loans to each other, further entangling the situation.

Details of the Settlement

The settlement agreement provides significant and near-term benefits to Genesis and its creditors. It will resolve all claims by FTX against Genesis “at a fraction of their face value,” according to Derar Islim, interim Genesis CEO. The agreement also eliminates the need for Genesis debtors to litigate their claims in the FTX bankruptcy proceedings.

Genesis lawyers stated in a court filing that the settlement would “significantly smooth the path to confirmation of the Genesis Debtors’ chapter 11 plan of reorganization.” They also emphasized that it would eliminate the uncertainties associated with protracted litigation among FTX, Genesis, and GGCI.

Controversy Surrounding the Settlement

The settlement has not been without contention. FTX creditors have expressed discontent, urging the Official Committee of Unsecured Creditors of FTX (UCC) to contest the agreement. Concerns have been raised about Alameda’s transfer of significant FTX customer funds to Genesis in 2022.

FTX asks court to settle Genesis dispute for a $175 million Genesis claim, the release of a $175 million customer claim and (near worthless) Alameda claims.

Down from first $3.9 billion to $2 billion asserted, this must be the worst deal to date, especially in light of the new… pic.twitter.com/ipxHuWMU4A

— FTX 2.0 Coalition (@AFTXcreditor) August 17, 2023

The FTX 2.0 Coalition also expressed that the arrangement is highly unfavorable, especially in light of an ongoing DOJ probe into DCG and Genesis. They stated that “Genesis claims are currently worth more than FTX’s even as Genesis lender balances are inflated by the interest they earned from lending, among others, to Alameda.”