U.S. Bankruptcy Court Judge Sean Lane extended a mediation period between crypto lender Genesis and its creditors at a Monday bankruptcy hearing as tensions flared over the role Genesis’ parent company Digital Currency Group (DCG) would play in the lender’s restructuring.
The mediation period, slated to end last month, will now conclude on June 16. Judge Lane appointed a mediator to steer talks between the insolvent lender and its creditors on May 1 after previous discussions between the parties broke down earlier this year. Digital Currency Group is the parent company to CoinDesk.
“There’s lots of different kinds of conversations that have to happen in connection with [bankruptcies],” Judge Lane said during the hearing. “The challenge always, of course, is that you can’t negotiate everything all at once.”
The judge’s order to extend the mediation period frustrated some of Genesis creditors, including the lender’s former business partner, crypto exchange Gemini. Genesis filed for bankruptcy in January in the Southern District of New York.
Legal representatives for Gemini argued that prolonging talks between the case’s players could inflict greater financial harm on those most impacted by the bankruptcy.
“Gemini urges all the parties as we know to keep in mind that each delay has actual people separated from their investments,” said Anson Frelinghuysen, a partner at Hughes Hubbard & Reed’s who represents Gemini. “Gemini’s patience, just like the patients of its Earn users, is wearing thin.”
Centralized cryptocurrency exchange Gemini froze withdrawals from accounts tied to its crypto lending product Gemini Earn last November after Genesis shuttered its operations following the multi-billion dollar collapse of one of its borrowers, crypto exchange FTX.
Gemini Earn customers, who have suffered as a result of Genesis’ financial woes, also chimed in during the hearing to bemoan the judge’s decision to extend the case’s mediation period.
“We don’t have the luxury of litigating endlessly,” Clinton Muller, a Gemini Earn customer, said during the hearing. “This [case] has real world implications to our homes and our families.”
While sympathetic to the troubles of Genesis’ creditors, Judge Lane challenged their assumptions that the timeline of the mediation process would drag out the court’s proceedings.
“Shortening the mediation does not shorten the case,” Judge Lane said. “Furthering the mediation tends to further prompt resolution of the case.”
During the hearing, Judge Lane also shot down requests to open the settlement talks to bankrupt crypto exchange FTX, which alleges Genesis owes it $3.9 billion. He instead gave the case’s parties more time to formulate a revised proposal that would guide payouts to hundreds of thousands of Genesis creditors.
Genesis, for its part, alleges it does not owe FTX any money at all. The lender has requested the case’s judge estimate the exact amount FTX is owed, which will be considered at next week’s hearing. Previously, Genesis attempted to have FTX’s unliquidated claims assessed at zero.
