It was the demise of the FTX platform led by Sam Bankman-Fried that pushed Geneisi into bankruptcy. After the collapse of the FTX platform Genesis Global ran into liquidity issues arising from the current crisis and also due to the earlier collapse of Terra (LUNA).
As one of the largest crypto lenders, Genesis had frozen customer redemptions on November 16, 2022, shortly after FTX filed for bankruptcy. Furthermore, on January 12, 2023, Genesis and the Gemini exchange were charged by the Securities and Exchange Commission (SEC) with illegally selling securities to investors.
Grayscale To File For Bankruptcy ?
However, on January 19, 2023, Genesis was forced to file bankruptcy. Also as per reports, Genesis Global Capital has stated that it has over $150 million in cash that will be used as liquidity to support its current operations and restructuring process.
Now, these events have raised a concern of negative impact on Grayscale as both Grayscale and Genesis are owned by Digital Currency Group.
It’s a known fact that Grayscale owns one of the world’s leading Bitcoin funds, GBTC. The GBTC funds are the funds through which traditional investors enter crypto trading without buying Bitcoin directly. However, after too many negative events in 2022, the industry witnessed massive sale GBTC shares as Bitcoin was in loss. Hence, this massive sale of GBTC shares has now brought Grayscale under spotlight.
In particular, in November 2022 when Grayscale announced that the firm would not move ahead with proof of reserves in the crypto market, the market participants grew anxious. Furthermore, Digital Currency Group (DCG) holds a massive stake in GBTC and this might see a clash within the company.
Nevertheless, now it’s just a matter of time which will reveal the actual impact of Genesis bankruptcy on Grayscale. What’s more important is investors conducting their own research before making any investments.
Source: https://coinpedia.org/news/is-grayscale-next-in-the-bankruptcy-list-here-is-what-the-data-suggests/