Genesis, a division of Barry Silbert’s Digital Currency Group, filed a Chapter 11 bankruptcy suit. Earlier this month, the organization reportedly closed down its wealth management company, HQ Digital. It was another sufferer of the FTX collapse.
Therefore, its failure might have a significant impact on the cryptocurrency market.
Crypto lending firm Genesis has filed for bankruptcy!
The latest domino to fall in DCG’s portfolio pic.twitter.com/fjAHf49756
— Blockchain Demons (@Blkchain_Demons) January 20, 2023
Genesis Filed for Chapter 11 Bankruptcy
A prominent cryptocurrency company appears to be the next to be victimized by the bear cycle. Genesis, a lending subsidiary of Digital Currency Group (DCG), filed for Chapter 11 bankruptcy on January 19. The futures, spot trading, broker-dealer, and custody businesses are still in operation and are not involved in the bankruptcy process.
The Crypto lender Genesis has filed for bankruptcy. This is yet another of wave of the FTX contagion.
However, just because Genesis’ bankruptcy came in after FTX’s, it does mean they were without fault. When they accept to give out loans with poor collateral, they are at fault. pic.twitter.com/FRH9ibgoE5
— Scale Network⚡️Scaling Up in Web3 (@scalenetwork_) January 20, 2023
DGC has stated that it will stop paying quarterly dividends to save funds. According to the company’s letter to shareholders, the firm is dedicated to strengthening its balance sheet by lowering operational expenses and improving cash management.
Moreover, Genesis’ statement disclosed the complete list of creditors affected by its collapse. The business reported more than 100,000 creditors in all and claimed to owe $3.4 billion to its 50 largest creditors.
— Digital Currency Group (@DCGco) January 20, 2023
Top creditors include Gemini, the crypto exchange founded by Cameron and Tyler Winklevoss, to whom Genesis owed $765 million, the metaverse project Decentraland ($55 million), and fund manager VanEck ($53 million).
According to documents submitted to the US Bankruptcy Court for the Southern District of New York, Genesis’ lending division has assets and liabilities between $1 billion and $10 billion.
Revisiting The Collapse Of Genesis: What Happened?
The collapse of Three Arrows Capital, which lost a little over $500 million in loans from Genesis, initially shocked Genesis. Moreover, the lender had to halt withdrawals when the collapse of FTX proved to be too much.
On November 16, the company froze client withdrawals after FTX shocked the financial world with its bankruptcy, prompting fears that more companies might follow suit. This month, Genesis reduced 30% of its workforce, another warning sign of danger.
Crypto lending platform Genesis Global Trading has reportedly cut 30% of its workforce in the second round of layouts in six months. According to a Jan. 5 Wall Street Journal report, Genesis reduced its staff by 30% following the platform suffering losses fro…
— Hourly Crypto Web3 Content || WAGMI (@tryweb3) January 6, 2023
The company also applied for bankruptcy protection from creditors in the US. As a result, its bankruptcy filing is the most recent in a series of cryptocurrency failures and significant layoffs brought on by last year’s price collapse.
The company also applied for bankruptcy protection in the US. As a result, its bankruptcy filing is the most recent in a series of cryptocurrency failures and significant layoffs brought on by last year’s price collapse.
Genesis’ Collapse—End of Cryptocurrency Lending?
Cryptocurrency history has not been particularly rough, but the recent crash brought several shocks that disrupted certain fundamentals of digital assets. A series of tragedies, such as the collapse of a pseudo-stablecoin dubbed TerraUSD in May and the dramatic collapse of the FTX cryptocurrency exchange in November, resulted in a surge of bankruptcies.
— Output (@outputCommunity) January 21, 2023
The incidents damaged the confidence of more traditional investors who wanted to profit from the growing interest in Bitcoin and decentralized finance. Furthermore, Genesis’ demise highlighted the risks of contagion. It occurs when problems in one sector spread quickly and unexpectedly, leading to significant losses elsewhere. All of these might temporarily freeze cryptocurrency investment.
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