By Michael Scott
Crypto lending firm Genesis Global confirmed filing for bankruptcy protection citing huge losses incurred following the FTX and Three Arrows Capital collapse. The Digital Currency Group DCG-owned lending firm admitted suffering hundreds of millions dollars in loss with the FTX collapse in November, delivering the final blow that plunged it into a liquidity crisis.
The documents filed in the bankruptcy court on Thursday, January 19, attributed the liquidity crisis to the firm’s exposure in 3AC and FTX’s calamitous downfall.
Genesis and Affiliates File for Bankruptcy
The submitted documents revealed the inclusion of Genesis Global Capital and Asia Pacific Pte in Genesis Global Holdco’s voluntary petitions within the bankruptcy court. The company operated within the DCG umbrella alongside CoinDesk and opted for joint administration.
The January 19 filing identified the Genesis Global creditors to exceed 100,000, with its liabilities and assets ranging from $1 to $10 billion. The filing detailed the assets and liabilities of Genesis subsidiaries range between $100M and $500 million.
The Gemini’s partner in the defunct Earn program estimated that over 50 creditors were owed an accumulative figure exceeding $3.5. The list of leading creditors captures Gemini alongside Mirana, Cumberland, and MoonAlpa Finance. The creditors listed arise from the crypto lending business whose operations were halted following the FTX implosion in November 2022.
A subsequent press release by Genesis excluded other subsidiaries involved in custody, spot trading, and derivatives. The late Thursday evening update indicated Genesis Global Trading was excluded from the filing and would continue offering operations. The filing detailed that Genesis Global Capital projected the restructuring process would yield residual money that could pay the unsecured creditors often overlooked during the bankruptcy proceedings.
Genesis Financial Crisis Evident in Recent Struggles
The submissions made by Genesis’s attorney recount that the lending firm suspended customer withdrawals following the sudden FTX collapse. The filing captures Genesis admitting the ongoing tussle with Gemini over the $900 million trapped since it halted operations. Despite pursuing sources to raise fresh capital, Genesis and parent firm DCG has battled increased pressure from the Winklevoss twins, who allege delay tactics in failing to refund the $900 million deposits.
Meanwhile, Gemini’s Cameron Winklevoss lauded the bankruptcy filing as crucial to recover the assets. He added that Gemini was mulling and suing DCG chief executive Barry Silbert for the delayed loan repayment. The exchange’s current liquidity struggles prompt the tassel.
In the past months, Genesis has portrayed devotion to navigating the liquidity crisis attributed to the FTX and 3AC collapse. It announced retaining Moelis & Co.’s investment bank to enable it to explore options. Days into January 2023, Genesis reduced its headcount by 30% to retain a workforce of 145 employees.
Implication of Genesis Bankruptcy
Beyond the creditors’ reprieve, the bankruptcy filing could trigger broader implications for bitcoin. The possibility arises from the awareness that Genesis and Grayscale are subsidiaries of DCG. The latter runs the Grayscale Bitcoin Trust (GBTC) with an estimated asset base exceeding $10 billion.
Days to the end of 2022, Grayscale was heavily discounted in its trading that only narrowed recently. The latest development of Genesis bankruptcy could prompt GBTC to liquidate bitcoin holdings, estimated to exceed 600000.
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