What creditors can expect from Genesis’ bankruptcy — and what others can learn
The holding company of troubled crypto lender Genesis Global Capital, Genesis Global Holdco LLC, filed for Chapter 11 bankruptcy protection in New York on Jan. 19. Genesis is the latest crypto platform to file for bankruptcy, joining Celsius, Voyager, BlockFi and FTX.
The application of Chapter 11 provisions to the crypto industry raises a series of new issues for courts. Here’s a preview of what creditors can expect, and what casual observers can learn about the implications of a Chapter 11 process for an entity in the crypto industry.
Preserving the anonymity of creditors — a key feature of crypto — is at odds with the transparency of the Chapter 11 process, where creditor identities are generally disclosed. Requiring the disclosure of customer names and certain account information presents risks for the creditor and the crypto entity: Individuals may be subject to hacking that exposes their wallet, while the crypto entity may be subject to scams, privacy law violations and client poaching attempts from rivals.
When confronted with this issue, courts have taken divergent approaches. Take Celsius and Voyager, for example. With Celsius, the court rejected its request to seal the identities of European customers covered by United Kingdom and European Union data protection regulations, finding that those rules did not take precedence over United States bankruptcy law. However, with Voyager, the same court allowed it to redact customer information under the same European regulations.
Despite this disparate treatment, a clear trend emerging is toward preserving anonymity — creditor names in the FTX and BlockFi cases remain under seal too — which is illustrative of how the Chapter 11 process is changing to adapt to the crypto
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