Genesis Becomes Another Crypto Lender to File for Bankruptcy
- Crypto lender Genesis has filed for bankruptcy in the Southern District of New York.
- The company has an estimated $1 billion to $10 billion worth of liabilities and assets.
- The firm aims to maximize value for all clients and stakeholders and strengthen its business for the future.
- Genesis has $150 million in cash which it will use to provide liquidity to continue its business operations.
Amid the prolonged crypto bear market, which has hit several big names in the industry, United States-based crypto lender Genesis becomes the latest company to join the seemingly unending bankruptcy rampage in the crypto sector.
Genesis Global Trading, which has recently filed for Chapter 11 bankruptcy in the Southern District of New York, has an estimated $1 billion to $10 billion worth of liabilities and assets. According to a January 19 press release, the primary reason behind bankruptcy is “to achieve a global resolution to maximize value for all clients and stakeholders and strengthen its business for the future.”
The company stated that it had been in talks with its advisors, “creditors, and corporate parent Digital Currency Group (DCG), to evaluate the most effective path to preserve assets and move the business forward.”
“Genesis has now commenced a court-supervised restructuring process to further advance these discussions,” the report reads.
In its Chapter 11 plan, Genesis contemplates a “dual track process” in which it will pursue a sale, a capital raise, and/or an equitization transaction, which would supposedly allow it “to emerge under new ownership.”
Interestingly, the company claimed to have over $150 million in cash, which aims to provide ample liquidity to maintain its continued business operations and aid the restructuring process.
An “independent special committee” of the company’s board of directors will oversee the restructuring process, which aims to deliver “an optimal solution for Genesis clients and Gemini Earn users.” The company’s interim CEO, Derar Islim, stated:
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders.”
It is important to note that the company’s derivatives, spot trading, broker-dealer, and custody businesses are not part of the Chapter 11 proceedings and will continue to operate as usual.
Notably, in November 2022, the company stopped accepting withdrawals from its platform due to market turmoil brought on by FTX’s demise. The action had severely impacted the users of Gemini Earn, a yield-bearing product for users of the Genesis-managed Gemini cryptocurrency exchange.
The United States Securities and Exchange Commission (SEC) filed charges against Genesis and Gemini for allegedly marketing unregistered securities through the Earn program.
As the news of a bankruptcy filing by a crypto lender broke, the members of the crypto community went on social media to express their thoughts on the matter, ranging from thinking that no one will be held accountable to calling the entire notion of crypto lending “stupid.”
The bankruptcy, according to Gemini co-founder Cameron Winklevoss, is “good news” and a step toward Gemini users receiving their money back. However, a member of the community criticized Winklevoss’ statement and underlined that users are the only victims.
Billy Markus, the founder of the biggest meme token, Dogecoin, also offered his opinion on the matter, labeling everyone involved in crypto lending as “idiots” and calling the idea of crypto lending entirely “stupid.”
As repored earlier by Bitnation, crypto lender BlockFi also filed for bankruptcy last year and stated that it had $257 million in cash on hand to help it keep going during the bankruptcy.