Crypto Giant Genesis Files For Bankruptcy As Casualties Mount After FTX Collapse

Topline

Cryptocurrency lender Genesis filed for bankruptcy late Thursday night, court documents show, the latest major player to fold and another blow to the sector as it struggles to recover from the collapse of Sam Bankman-Fried’s exchange FTX last year.

Key Facts

Crypto broker Genesis Global Holdco LLC filed for Chapter 11 bankruptcy protection in New York federal court late Thursday night, documents show.

Genesis Global Capital and Genesis Asia Pacific, two subsidiaries the parent firm said were only involved in its lending business, also filed for bankruptcy protection.

Genesis Global Holdco and Genesis Asia Pacific each reported assets and liabilities in the range of $100 million and $500 million.

Genesis Global Capital reported between $1 billion and $10 billion in assets and liabilities and listed over 100,000 creditors in the “mega” bankruptcy filing, with the top two unsecured claims alone amounting to nearly $1.3 billion.

Genesis said it has more than $150 million in cash on hand that will provide “ample liquidity” to keep the business operating and “facilitate the restructuring process,” stressing that its derivatives and spot trading, dealer and custody businesses are not part of the filing and continue to run as normal.

Interim chief executive Derar Islim said the bankruptcy and in-court restructuring offered the firm “the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders.”

Key Background

Reports over Genesis’ impending bankruptcy swirled since it paused customer withdrawals amid the “market turmoil” after FTX folded. Fears grew when the firm, hurt by loans to FTX affiliate Alameda Research, laid off nearly a third of its staff in early January. Chapter 11 bankruptcy allows a company to stay in business while it figures out a way to pay its creditors, typically by major reorganizations to its debts and operations. Genesis’ filing marks the downfall of another major player in the crypto industry after prices for the digital assets collapsed last year. The bleak situation worsened in the wake of FTX’s collapse. In addition to FTX, former heavy hitters filing for bankruptcy in the last year include Celsius, BlockFi, Three Arrows and Voyager.

What To Watch For

The court filings listed nearly a $800 million loan payable from Gemini, the crypto exchange led by Cameron and Tyler Winklevoss, which has been the subject of a weeks-long dispute. The Winklevoss twins have claimed Gemini owed more than $900 million to some 340,000 Earn investors on the platform. Following the filing, Cameron Winklevoss said the bankruptcy does not immunize Genesis’ parent company Digital Currency Group or its chief executive Barry Silbert. On Twitter, he threatened to escalate the matter and file a lawsuit with “Barry and DCG imminently” unless a “fair offer to creditors” is made.

Further Reading

Crypto Broker Genesis Cuts 30% Of Staff, Reportedly Mulls Bankruptcy (Forbes)

Who Is Barry Silbert, The Former Crypto Billionaire That Cameron Winklevoss Is Accusing Of Accounting Fraud? (Forbes)