Genesis: the huge debt of the crypto lender

Genesis is once again in the spotlight of the media, the crypto lender apparently owes Gemini’s clients about $900 million. Crypto exchange Genesis, along with its subsidiary Digital Currency Group (DCG), are looking for ways to recover this large sum of money.

According to a recent article in the Financial Times, the Winklevoss twins (made famous by the lawsuit against Mark Zuckerberg and Facebook), now owners of the Gemini crypto exchange, are having major problems related to the funds invested on Genesis. Genesis’ company is among those hardest hit by the collapse of FTX.

Barry Silbert, founder of Digital Currency Group (DCG), recently addressed shareholders with a letter revealing the large debt Genesis has with the exchange platform. 

Gemini’s loan was intended to finance new investment opportunities and to buy back shares of property not directly related to the company. The loan was due in May 2023, but apparently the lending company Genesis is unable to pay it off. 

“DCG has taken over some of Genesis’ liabilities related to this counterparty to ensure the availability of capital to operate and scale our business over the long term.”

Now Gemini has formed a committee of creditors to try to recover funds in Genesis and DCG.  

The debt of crypto lender Genesis is not just about Gemini

In addition to the previously reported group of Gemini clients with $900 million, there are two other groups of Genesis creditors represented by lawyers. The amount of loans we are talking about is much larger than the debt that affects only Gemini. 

In fact, the Genesis creditor group is more than one, and the loan sum is equivalent to about $1.8 billion. Apparently the amount of credit, and thus the debt of the lending platform, will continue to rise higher and higher.

In a letter to investors dated 23 November, Genesis said it has initiated discussions with potential investors and our major creditors and borrowers, including Gemini and DCG (Digital Currency Group), to agree on a solution that will support the overall liquidity of our lending business and meet the needs of our customers.

Genesis declined to comment on this story. Proskauer Rose, Latham & Watkins, and Kirkland & Ellis did not respond to press requests for comment.

Is Genesis on the road to bankruptcy?

“We do not plan to file for bankruptcy in the immediate term. Our goal is to resolve the current situation consensually, without having to file for bankruptcy. Genesis continues to have constructive talks with creditors.”

Crypto lending company Genesis has denied speculation that it is planning an “imminent” bankruptcy filing if it fails to cover a $1 billion deficit caused by the collapse of crypto exchange FTX.

In other communications, Genesis reassured that financial and custodial activities remain operational, despite the fact that withdrawals from loan customers have been suspended.

Meanwhile, the CEO of Digital Currency Group, was quick to let his investors know that the company will have about $800 million in revenue in 2022. In addition, he stated that despite the difficult time and the ongoing crypto winter, “we will all come out stronger.”