Cryptocurrency lending giant, Genesis Global has filed for Chapter 11 bankruptcy following a market rout after the collapse of FTX. As per the filing, the company has estimated assets and liabilities in the range of $1 billion to $10 billion.
On January 19, Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit Genesis Asia Pacific in the Southern District of New York. This comes just after the US Securities and Exchange Commission (SEC) charged Genesis and crypto exchange Gemini with selling unregistered securities in connection with a high-yield product called “Earn”, on January 12. Genesis Global Capital one of the largest crypto lenders, froze customer redemptions on November 16 after the spectacular failure of Sam Bankman-Fried’s FTX Empire.
Another Victim Succumbs
According to an official press release, Genesis stated that the firm has been in talks with its advisors and parent Digital Currency Group (DCG) to “evaluate the most effective path to preserve assets and move the business forward.”
In addition, the company has also started a court-supervised restructuring process to reach a solution for its clients. However, other subsidiareis of Genesis involved in the derivatives and spot trading and custody businesses along with Genesis Global Trading have not been inculded in the bankruptcy filing and will continue operations.
As per the Chapter 11 filing, Genesis has proposed a manual suggesting a “dual track process” to sell, raise capital or equitization transaction that would enable the business to use the transaction proceeds to pay creditors. The crypto lender also highlighted the company has more than $150 million in cash on hand which will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process. Derar Islim, Interim CEO at Genesis, added,
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders.”
Gemini CEO Threatens DCG CEO Over $900M
5/ We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.
— Cameron Winklevoss (@cameron) January 20, 2023
Soon after the bankruptcy filing, Gemini CEO, Cameron Winklevoss threatened to sue DCG CEO Barry Silbert over the repayment of a $900 million loan. Genesis was locked into a week-long public spat with with Gemini Trust Co, founded by Cameron and Tyler Winklevoss, former U.S. Olympic rowers. On Jan. 10, Cameron Winklevoss called for the removal of Barry Silbert as the chief executive of DCG. In his latest tweet, Cameron Winklevoss alleged,
“We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.”
The Gemini- Genesis debacle began in 2021 after both the companies’ joined hands for Gemini “Earn”, a high-yield-bearing offering serving hundreds of thousands of U.S. investors. As per the process, Gemini lent customers’ funds to Genesis, which, in turn, loaned that money out to other crypto firms.
However, things turned sour after Genesis suspended redemptions and new loan originations following a series of bad loans to insolvent crypto firms such as Three Arrows Capital (3AC) and FTX. Without access to their funds, Gemini Earn users turned the heat on Winklevoss, suing him and his brother for alleged fraud.