Genesis Global and affiliated entities have begun disbursing $4 billion in creditor payouts following the completion of their restructuring process.

According to an Aug. 2 statement, crypto lender Genesis Global started repayments to over 100,000 creditors after declaring bankruptcy in January 2023.

The recovery rates vary by asset type, with Genesis creditors will receiving an average of 64% of pre-bankruptcy value. The lender disclosed 51.28% recovery for Bitcoin (BTC) creditors, 65.87% for Ethereum (ETH) creditors, and 29.58% for Solana (SOL) assets. 

Stablecoin and U.S. dollar creditors fare the best, recovering 100% of their fiat-pegged tokens and cash. The repayments are divided between in-kind (the exact crypto asset deposited) and cash. This follows reports of Genesis moving $3 billion in cryptocurrencies.

The Genesis press release stated, “Creditors will be entitled to additional recoveries following the initial distribution, depending on the results of ongoing claims reconciliation, contractual rights against third parties, and litigation.”

Genesis bankruptcy

Genesis initially collapsed in 2022 due to contagion in the crypto industry. The fallout from Terra’s implosion reverberated through digital asset markets, impacting various providers.

The Terra saga crippled hedge fund Three Arrows Capital and crypto exchange FTX, ultimately forcing Genesis to halt withdrawals and declare bankruptcy.

The firm received financial aid from parent company Digital Currency Group, but DCG’s promissory note could not abate the beleaguered business and legal tussles with crypto exchange Gemini heaped on turbulent times. 

New York Attorney General Letitia James also sued DCG and the crypto lender for misleading investors and falsifying financial statements. The matter settled for $2 billion between the crypto lender and NY authorities. Genesis said its restructuring plan includes a $70 million litigation fund “to pursue causes of action against various third parties, including Digital Currency Group” as protected court battles continued.

Ten years after its collapse, the Mt. Gox crypto exchange finally began paying off creditors. What is the reason for this process, which has dragged on for a decade? 

Let’s dive deep into the chronology of events associated with the fall of one of the once-largest crypto exchanges.

The emergence of Mt. Gox

The history of Mt. Gox goes back to the early days of the crypto industry. It all started in 2010 when developer Jed McCaleb founded the Mt. Gox platform for the Magic: The Gathering game, but then transformed it into a Bitcoin exchange. 

A year later, he sold the platform to developer Mark Karpeles. After the change in management, Mt. Gox quickly became one of the most popular BTC platforms. 

As a result, the first major hacker attack occurred in June 2011. Hackers stole at least 25,000 BTC, or about $400,000, at the time of the attack. Then, the price of Bitcoin on Mt. Gox collapsed from $17 to almost zero.

After the attack, Mt. Gox continued to develop, and in 2013, it processed 70% of all Bitcoin transactions worldwide. However, the exchange faced technical problems that led to a significant increase in transaction processing time.

Internal difficulties and hack of Mt. Gox 

Despite external success, the exchange experienced great internal difficulties. In particular, Mt. Gox had no control over the quality and security of the code. In addition, the project lacked a financial accounting system and control over balances and reserves. Simply put, no one monitored the flow of money and cryptocurrency.

In February 2014, Mt. Gox suddenly stopped Bitcoin withdrawals. The platform team reported that a bug in the Bitcoin code made it possible to effectively double-spend coins, which the attackers used concerning the exchange’s blockchain address. After that, the platform finally stopped all withdrawals.

By the end of the month, the price of Bitcoin on Mt. Gox was only 20% of the average market price, which was a clear indication of investors’ confidence that the project would not be able to solve the problems that had arisen. On Feb. 24, 2014, all trading operations were suspended on the platform, and a few hours later, its website went down.

Later, the exchange team discovered the theft of approximately 750,000 BTC from users, which had gone unnoticed for several years. As a result, Mt. Gox became insolvent — on Feb. 28, 2014, it declared bankruptcy and closure.

The hack extent and the mystery of missing Bitcoins

Hackers attacked Mt. Gox and stole 744,408 BTC belonging to customers and 100,000 BTC belonging to the company. This financial disaster led to the exchange being declared insolvent. Later sources indicated that Mt. Gox had already leaked around 80,000 Bitcoins before Karpeles bought it in 2011.

Many theories have formed around the hack. One popular theory suggests that Mt. Gox never actually had the amount of coins it claimed to have and that Karpeles may have manipulated the data to create the illusion of more bitcoins than it had.

As for how the hackers were able to gain access, some speculate that an internal staff member could have gained access. In contrast, others suggest that BTC from the cold storage was gradually transferred to the Mt. Gox system as the hot wallet was depleted. The lack of proper controls allowed the hackers to siphon the assets undetected.