Genesis, a Crypto Lending Company, Declares Bankruptcy Amidst Financial Turmoil

Cryptocurrency Lender Genesis Global Holdco LLC Has Filed For Bankruptcy, Becoming the Latest Firm To Collapse In the Aftermath Of the FTX Exchange's Swift Downfall And Last Year's Rout In Digital Assets.

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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, court documents show. Genesis Global Capital listed the same range, $1 billion to $10 billion, for both assets and liabilities as well as over 100,000 creditors — the top 50 unsecured claims amount to about $3.4 billion.

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Genesis Energy plans to use the Chapter 11 bankruptcy process to sell assets or raise money, with creditors potentially owning the reorganized business if those efforts are unsuccessful, according to a statement. The company intends to use $150 million of cash on hand to fund itself during bankruptcy proceedings. Chapter 11 allows a firm to continue operating while trying to work out ways to repay creditors.

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Digital Currency Group, the parent company of Genesis, has been in confidential negotiations with various creditor groups amid a liquidity crunch. Genesis has warned that bankruptcy is possible if it fails to raise cash.

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Genesis Global Trading and other units involved in derivatives and spot trading and custody businesses are not part of the bankruptcy filing.

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Cryptocurrency prices have been volatile in recent months, with a number of high-profile projects facing serious challenges. These so-called "serial meltdowns" are shaking the foundations of the crypto world, and raising questions about the long-term viability of digital currencies. While the crypto market has always been prone to volatility, the recent string of meltdowns has been unprecedented. Projects like The DAO, Parity, and BitConnect have all imploded in spectacular fashion, losing billions of dollars in value. These failures have cast a shadow over the entire industry, and raised doubts about whether digital currencies can ever be truly stable.The crypto community will need to work hard to rebuild trust in the wake of these serial meltdowns. Only time will tell if digital currencies can recover from this latest setback.

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Barry Silbert's DCG has come under financial pressure following the collapse of hedge fund Three Arrows Capital last year. Genesis's lending unit suspended withdrawals in November, soon after FTX - where Genesis held some of its funds - filed for bankruptcy. With the cryptocurrency market shedding around $2 trillion since its peak in 2021, a number of crypto lenders have struggled.

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According to a statement from Genesis, redemptions and loan originations at its lending operation remain suspended and claims will be handled in bankruptcy court.
Silbert and Gemini crypto exchange co-founder Cameron Winklevoss are locked in an escalating battle, with customers of the latter losing access to $900 million of funds that were placed with Genesis.

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Winklevoss said in a tweet after the filing that “unless Barry and DCG come to an agreement with creditors, we will be filing a lawsuit against Barry and DCG imminently.”
When asked for comment, a Genesis spokesperson referred back to the company's statement. DCG did not immediately respond to an emailed request for comment sent outside of regular business hours.

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In January, Genesis laid off a significant portion of its staff in response to a liquidity crunch at its lending unit. Interim Chief Derar Islim sent a letter to clients informing them of the situation and saying that the company needs additional time to come up with a solution.

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DCG, a leading player in the crypto industry, said on Jan. 17 that it is suspending quarterly dividends to preserve cash.
The group's business includes digital-asset fund manager Grayscale Investments LLC. The Grayscale Bitcoin Trust, the world's largest crypto fund, has been trading at a discount to the amount of cryptocurrency it holds, leading shareholders to call for changes.

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Crypto markets were a little weaker today as they absorbed some recent developments. Bitcoin was mostly unchanged, trading at around $21,000. The token is up 27% for the year so far, but is still down from its 64% rout in 2020.