Genesis Global Capital is making plans to file for bankruptcy before the end of the week. The troubled crypto lender halted withdrawals on November 16, and a bankruptcy filing has been expected since then.
Genesis readies to file for bankruptcy this week
Genesis had funds in the FTX exchange before the latter filed for bankruptcy on November 11. The company’s financial situation started weakening in mid-2022 after the collapse of Three Arrows Capital, a bankrupt crypto hedge fund to which Genesis had lent money.
A report by Bloomberg noted that people familiar with the matter expected Genesis to file for bankruptcy as soon as this week. The company is also negotiating a deal with creditors after months of these parties failing to access their funds. The pre-packaged bankruptcy deal between the company and creditors includes cash and equity in Digital Currency Group.
Genesis owes creditors more than $3 billion. If the company files for bankruptcy, it will join the list of top crypto firms that have gone under in the past years. Celsius, Three Arrows Capital, and Voyager’s bankruptcies preceded FTX’s November bankruptcy. Crypto mining companies such as Core Scientific Inc have also filed for bankruptcy.
The financial troubles facing Genesis became evident after the collapse of FTX. Genesis, one of the largest crypto lending platforms in the crypto market, halted withdrawals a few days after FTX filed for bankruptcy. At the time, Genesis said that the decision was triggered by “unprecedented market turmoil” and a liquidity crunch. The company has been unsuccessfully trying to raise fresh funding.
Genesis woes impact Gemini and CoinDesk
Out of the over $3 billion that Genesis owes to creditors, $900 million belongs to the users of the Gemini Earn product. Gemini, a cryptocurrency exchange founded by Cameron and Tyler Winklevoss, used Genesis as the main lending partner for the Earn program, allowing retail investors to generate high yields when they lend out their crypto assets.
The situation between Gemini and Genesis became public earlier this month when Cameron took to Twitter to call out the CEO of DCG, Barry Silbert, for using bad faith tactics to resolve Genesis’ financial troubles. The Gemini co-founder said that Genesis misled Gemini Earn users and made false representations about the risk involved.
Cameron has also urged the DCG board to remove Silbert as the company’s CEO. The situation between Gemini and Genesis has attracted the attention of the US Securities and Exchange Commission (SEC), which is suing the two companies for selling unregistered securities.
The financial woes at Genesis are also being felt at CoinDesk, a crypto news publication that is a subsidiary of Silbert’s DCG. CoinDesk is one of the largest publications in the crypto industry, but it is considering a partial or entire sale of the company. The publication hired Lazard as the investment banker overseeing the deal. The company has reportedly been looking for a deal for months.
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