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DCG Objects Settlement Between NY Attorney and Failed Genesis

Crypto venture capital firm Digital Currency Group (DCG) has criticized the recent settlement reached between its subsidiary Genesis and the state of New York, labeling it a “subversive arrangement.”

Last week, DCG voiced concerns over Genesis, a now-defunct cryptocurrency lender, intending to liquidate assets worth approximately $1.6 billion, including holdings in Grayscale’s Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG).

In a newly filed objection on Wednesday, DCG reiterated its opposition to Genesis’s proposed settlement with the New York Attorney General’s office. DCG argued that Genesis failed to adhere to proper legal procedures, and the agreement improperly redirected funds to favored creditors.

Genesis, according to DCG, cannot exploit a “settlement” to unjustly transfer value from lower-ranking creditors to preferred ones in contravention of absolute priority.

Moreover, DCG asserted that the settlement represents an underhanded maneuver to bypass U.S. bankruptcy laws. The parent company of Genesis emphasized that the settlement was crafted in secrecy, describing it as a “subversive arrangement.”

Earlier this month, Genesis reached an agreement with the New York Attorney General’s office, stating that it would settle allegations of investor fraud.

DCG Gets Backing from Former NY Federal Attorney

In a separate submission on Wednesday, Jason Brown, a former senior federal attorney in New York, voiced his support for DCG’s objection.

Brown asserted that, in his view, the settlement deviates from the customary practice of engaging in discussions before reaching a resolution.

“In a case of this magnitude, it’s typical for the parties to conduct thorough, merit-based evaluations of the claims before finalizing a settlement,” he stated.

During his tenure, Brown collaborated with the New York Attorney General’s office to oversee its legal affairs and operations. He was responsible for managing various aspects of the NYAG’s functions, including negotiating plea agreements and settlements.

Brown emphasized that Genesis should have pursued a more rigorous process, involving the preparation and exchange of comprehensive analyses regarding potential settlement values.

Genesis initiated Chapter 11 bankruptcy proceedings in October in the Southern District of New York, seeking protection from its creditors. The exchange announced its intention to utilize $150 million in cash to sustain the company throughout bankruptcy proceedings and to repay creditors.

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

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