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As the crisis worsens, cryptocurrency lender Genesis files for bankruptcy.
Genesis Global Holdco LLC, a cryptocurrency lender, filed for bankruptcy, becoming the newest company to fail following the fast demise of the FTX exchange and the collapse of the digital asset market in 2017. According to court records, the business, along with its subsidiaries Genesis Global Capital LLC and Genesis Asia Pacific Pte, filed for Chapter 11 bankruptcy protection on Thursday in the Southern District of New York. Genesis Global Capital identified over 100,000 creditors and the same range of assets and liabilities, $1 billion to $10 billion; the top 50 unsecured claims total around $3.4 billion.
According to a statement, Genesis’s strategy is to use the Chapter 11 procedure to try and sell assets or raise money; if such efforts are unsuccessful, creditors will eventually possess the reformed company. The company plans to use its existing liquidity of $150 million to support itself during bankruptcy. A company can carry on under Chapter 11 while looking for ways to pay back creditors. In the midst of a liquidity crisis, the parent company Digital Currency Group had been in private discussions with various creditor parties. If Genesis couldn’t raise money, it will risk bankruptcy, as it had previously stated. The bankruptcy filing excludes Genesis Global Trading and other divisions engaged in the custody, spot trading, and derivatives industries.
Following the failure of the hedge fund Three Arrows Capital last year, financial pressure started to build up at Barry Silbert’s DCG. In November, shortly after FTX, where Genesis held some of its cash, filed for bankruptcy, the lending division of Genesis halted withdrawals. Since their peak in 2021, digital assets have lost over $2 trillion, and numerous crypto lenders have failed as a result of the selloff. According to the statement, Genesis’s lending operation’s loan originations and redemptions are still on hold, and the bankruptcy court will handle any claims. The co-founder of the Gemini cryptocurrency exchange, Cameron Winklevoss, and Silbert are engaged in a heated argument over the loss of access to $900 million in money that was deposited with Genesis.
After the filing, Winklevoss tweeted that “we will be launching a lawsuit over Barry and DCG imminently” unless they “come to their senses and make a reasonable offer to creditors.” Requests for response were directed to the company’s statement by a Genesis spokeswoman. An email request for feedback received outside of regular business hours did not receive a prompt response from DCG. In its most recent round of job cuts, Genesis let go about 30% of its workforce in January. In a letter to clients earlier, interim chief Derar Islim stated that it will take “extra time” to resolve a liquidity crisis at the loan section.
A key player in the cryptocurrency sector, DCG, announced on January 17 that it is halting quarterly dividends in order to conserve capital. The group’s diverse business portfolio includes Grayscale Investments LLC, a manager of digital assets. The Grayscale Bitcoin Trust, the biggest cryptocurrency fund in the world, has been trading at a significant discount to the value of the cryptocurrencies it owns, infuriating shareholders who have demanded reforms. Prices for digital assets decreased a little as the cryptocurrency markets took in the news. After previously rising as much as 1.3%, Bitcoin was little changed near $21,000 as of 6:47 a.m. in London. The token’s 2023 gains are up 27% so far, reversing some of last year’s 64% decline.
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