In the latest news from the world of cryptocurrency, FTX, a major crypto exchange, is looking to recover around $4 billion from Genesis, a bankrupt crypto lender, and a still-solvent British Virgin Islands-based entity. This move is part of FTX’s efforts to recover value for its creditors.
According to a court filing in a New York Bankruptcy Court on May 3, FTX’s lawyers sought $1.8 billion in loans and a $273 million collateral pledge that Genesis allegedly received from FTX’s sister trading firm, Alameda Research. FTX is also seeking to claw back $1.6 billion in withdrawals that Genesis allegedly made, as well as a further $213 million that was purportedly withdrawn by GGC International, the BV-based entity, from the exchange before it declared bankruptcy on November 11, 2022.
FTX moves to claw back $3.9 billion from Genesis.
1. $2.1 billion loan repayments/collateral pledge
2. $1.8 billion FTX exchange withdrawals pic.twitter.com/1SsW8yoPck— FTX 2.0 shareholder (in spe) (@AFTXcreditor) May 3, 2023
The court filing alleges that Genesis was “largely repaid” its nearly $8 billion in loans made to Alameda, “unlike other FTX creditors and customers.” FTX claimed that the bankrupt lender was “one of the main feeder funds for FTX and instrumental to its fraudulent business model.” The exchange’s lawyers are seeking the clawback under bankruptcy laws that allow them to recoup “avoidable transfers” that occur in a 90-day period before a company declares bankruptcy.
The news is significant for the cryptocurrency industry, as it highlights the risks and complexities associated with the use of digital assets. Cryptocurrency exchanges and lenders are largely unregulated, making it difficult for regulators to oversee and enforce rules and regulations. This lack of oversight and regulation has led to the rise of fraudulent activities and scams in the industry.
The FTX-Genesis case is just one example of the challenges faced by cryptocurrency firms, investors, and regulators. However, it also underscores the importance of responsible investing and risk management in the cryptocurrency market. As the market continues to grow and evolve, it is crucial for investors and firms to be vigilant and take appropriate measures to protect themselves and their investments.
In conclusion, the FTX-Genesis case is a reminder of the challenges and risks associated with the cryptocurrency industry. While the industry offers exciting opportunities, investors and firms must exercise caution and responsible risk management to avoid being caught up in fraudulent activities or scams. As the market continues to evolve, it is crucial for regulators to provide oversight and guidance to ensure the integrity and stability of the market.
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