Cryptocurrency Lender Genesis Files for Bankruptcy Months After FTX Collapse
Genesis Global, a cryptocurrency lender, filed for bankruptcy Jan. 19, becoming the latest company to file for bankruptcy following the collapse. FTX November
The lender announced it had filed for Chapter 11 bankruptcy protection in a press release, stating that the move was part of “strategic actions to achieve a global resolution to maximize value for all clients and stakeholders and strengthen its business for the future.”
The company stated previously that it was currently in discussions with creditors’ advisers to determine the best way for assets to be preserved and to continue the business.
“Genesis has now commenced a court-supervised restructuring process to further advance these discussions and reach a holistic solution for its lending business, which, if achieved, would provide an optimal outcome for Genesis clients and Gemini Earn users,” The company stated.
Genesis Global Holdco as well as two of its lending business subsidiary, Genesis Global Capital Pte. Ltd. filed voluntary bankruptcy petitions at Manhattan federal court.
It noted that the companies were only involved in Genesis’s crypto lending business, adding that the derivatives, spot trading, broker-dealer, and custody businesses of Genesis are not part of the Chapter 11 proceedings and will continue client trading operations.
Genesis Hit Hard by ‘Extraordinary Challenges’
According to the company bankruptcy is part of a larger restructuring process. “roadmap to an exit” Genesis has designed the plan.
The plan “contemplates a dual track process in pursuit of a sale, capital raise and/or equitization transaction that would enable the business to emerge under new ownership.”
Genesis said it will begin a marketing and sale process to monetize its assets or otherwise raise capital and use the transaction proceeds to pay creditors “fairly and equitably.”
Additionally, the crypto lender said it intends to use $150 million of cash on hand to fund its ongoing operation and facilitate the restructuring process, which will be led by an independent special committee, during bankruptcy proceedings.
Derar Islim, the company’s interim CEO, noted that Genesis has been impacted by the “recent extraordinary challenges” The facing the cryptocurrency industry, including the default of Three Arrows Capital and the bankruptcy of FTX.
FTX, led by Sam Bankman-Fried, filed for Chapter 11 bankruptcy in November 2022 amid a liquidity crisis.
This week, creditors for the bankrupt company stated that approximately $413 million worth of cryptocurrency The company was robbed through “unauthorized transfers.”
Bankman-Fried was arrested in December and pleaded not guilty in January to fraud, conspiracy, violations of campaign finance laws, and money laundering.
He is scheduled to go on trial in October.
Bloomberg reports that Genesis included over 100,000 creditors in bankruptcy filings. reported. That includes liabilities ranging from $1 billion to $10 billion dollars.
SEC Files Charges Against Genesis, Gemini
The firm’s announcement regarding the bankruptcy filing comes shortly after the Securities and Exchange Commission (SEC) filed charges against Genesis and crypto exchange Gemini, which is run by billionaire twins, Tyler and Cameron Winklevoss.
The SEC alleges that the two companies partnered up to sell unregistered securities to retail investors through the Gemini Earn crypto asset lending program.
In November, Genesis announced that it would not allow its Gemini Earn investors to withdraw their crypto assets because Genesis lacked sufficient liquid assets that enabled it to do so amid a volatile crypto market prompted by the collapse of FTX.
That, the SEC says, led to customers losing millions; at the time Genesis held approximately $900 million in investor assets from 340,000 Gemini Earn investors.
“Through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors,” The SEC stated. “Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”
On Twitter on Thursday, Gemini co-founder Cameron Winklevoss said the company has been “working around the clock to negotiate an acceptable solution” but that Digital Currency Group (DCG), the parent company of Genesis, and its CEO Barry Silbert “continue to refuse to offer creditors a fair deal.”
“The good news is that, by seeking the protection of the bankruptcy court, Genesis will be subject to judicial oversight and be required to provide discovery into the machinations that brought us to this point,” Winklevoss added.
Winklevoss added that Gemini is preparing to take legal action against DCG, Silbert, and others who he said “share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.”
The Epoch Times has contacted Genesis for comment.
Genesis is the latest company to file for bankruptcy after FTX, Celsius, BlockFi, and Voyager did so over the past year.
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