January 31, 2023

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Crypto Lender Files Genesis Trading for Bankruptcy Protection

Barry Silbert, Founder and CEO, Digital Currency Group

David A. Grosjean | CNBC

Cryptocurrency lender Genesis filed for Chapter 11 bankruptcy protection late Thursday night in Manhattan federal court, the latest casualty in the industry contagion caused by the collapse of FTX and a crippling blow to the business at the heart of Barry Silbert’s crypto conglomerate.

The company listed more than 100,000 creditors in a “massive” bankruptcy filing, with total liabilities ranging from $1.2 billion to $11 billion, according to bankruptcy documents.

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Three separate petitions were filed with the Genesis Holding Companies. In a statement, the company indicated that the companies were only involved in Genesis’ cryptocurrency lending business. The company’s derivatives and spot trading business will continue unhindered, as will Genesis Global Trading.

“We look forward to strengthening our dialogue with DCG and our creditor advisors as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future,” said Genesis Interim CEO Dirar Islam. Permit.

The filing comes after months of speculation about whether Genesis will enter bankruptcy protection, and just days after the Securities and Exchange Commission She sued Genesis and its sole partner, Gemini, on the offering and sale of unregistered securities.

Genesis listed a $765.9 million loan payable from Gemini in its bankruptcy filing Thursday. Other large claims included a $78 million loan payable from Donut, a high-yield decentralized platform, and VanEck Fund, with a $53.1 million loan payable.

Genesis is in negotiations with creditors represented by law firms Kirkland & Ellis and Proskauer Rose, sources familiar with the matter told CNBC. The bankruptcy puts Genesis alongside other cryptocurrency exchanges incl BlockFiFTX , CelsiusAnd Voyager.

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FTX breakdown In November, the market froze, leading customers across the cryptocurrency scene to request withdrawals. the The Wall Street Journal reported that in the aftermath of the FTX collapse, Genesis sought a $1 billion emergency bailout, but found no interested parties. Parent company DCG, which owes creditors a growing debt of more than $3 billion, halted its dividend this week, CoinDesk reported.

crypto infection

Genesis has provided loans to crypto hedge funds and over-the-counter companies, but a series of bad bets were made last year Caused great damage to the lender and forced him to do so Withdrawals suspended on November 16th.

The New York-based company has extended cryptocurrency loans to Three shares of capital (3AC) and Alameda Research, the hedge fund started by Sam Bankman-Fried and closely associated with its FTX stock exchange.

3AC Filed bankruptcy Its July in the midst of the “cryptocurrency winter”. Genesis had loaned more than $2.3 billion in assets to 3AC, according to court filings. 3AC’s creditors have been fighting in court to recover even a fraction of the billions of dollars the hedge fund once controlled.

Meanwhile, Alameda was integral to FTX’s eventual demise. Bankman Fried has it repeatedly denied becomes aware of fraudulent activity within his corporate network, but remains unable to provide a substantive explanation for A multi-billion dollar hole. He was arrested in December and released on $250 million bail ahead of his trial, which is set to begin in October.

Genesis had $2.5 billion in exposure to Alameda, though this situation was just as well Closed in August. After FTX’s bankruptcy in November, Genesis said about $175 million of Genesis assets were “locked” on the FTX platform.

Genesis’ financial whirlpool exposed Silbert DCG’s broader empire. The parent company was forced to take over the $1 billion Genesis generated by the collapse of 3AC. In a subsequent letter to investors, Silbert reveal An additional $575 million loan from Genesis to DCG for undisclosed investment purposes.

DCG pioneered general circulation trustallowing investors to hold bitcoins and other currencies in their wallets without direct exposure. Grayscale bitcoin box The discount widened to the net asset value Significantly last year as confidence in the conglomerate waned.

This is a developing story. Please check back for updates.