Bloomberg – Genesis Global Holdco LLC has officially declared itself insolvent, represented by the cryptocurrency exchange The latest company to go bust after last year’s FTX debacle and loss of digital assets.
The company, along with its two companies, Genesis Global Capital LLC and Genesis Asia Pacific Pte, filed for Chapter 11 protection in the Southern District of New York yesterday, according to court documents.
Genesis Global Capital has listed a range of $1 billion to $10 billion in both assets and liabilities, plus more than 100,000 creditors — the 50 largest unsecured loans totaling about $3.4 billion.
Genesis’ plan is to use the Chapter 11 mechanism to try to sell assets or raise cash, and if those efforts fail, the creditors eventually become the owners of the reorganized company, according to a statement. The company plans to use $150 million in cash to fund itself in the event of bankruptcy. Chapter 11 is a feature that allows a company to continue operating while it tries to find a way to pay its creditors.
Its parent company, Barry Silbert’s Digital Currency Group, has been involved in secret negotiations with various groups of creditors in an effort to alleviate its liquidity crisis. Genesis has warned of possible bankruptcy if it cannot raise the funds.
Genesis Global Trading and other derivatives trading, spot trading and custody units are not part of the bankruptcy filing. The financial pressure on Barry Silbert’s DCG Group began to mount after the collapse of hedge fund Three Arrows Capital last year.
Genesis’ lending unit suspended withdrawals in November, shortly after FTX — where Genesis had kept some of its money — filed for bankruptcy. Digital assets have lost around $2 trillion since peaking in 2021 and a number of cryptocurrency lenders have been massively sold off.
The statement stated that payments on loans and grants for Genesis will remain outstanding while the claims will be dealt with in bankruptcy court. Barry Silbert is locked in an escalating battle with Gemini Crypto Exchange founder Cameron Winklevoss, whose clients lost access to $900 million in funds placed with Genesis.
Threat of lawsuit
Winklevoss said in a post-filing tweet that “Unless Barry and DCG come to their senses and make creditors a fair offer, we will file a lawsuit against Barry and DCG imminently.”
A Genesis spokesperson sent a request for comment on the company’s statement. DCG did not immediately respond to an emailed request for comment outside of business hours. In January, Genesis laid off about 30% of its employees in its latest round of job cuts.
Acting Chairman Dirar Islam previously sent a letter to clients saying he needed “extra time” to find a solution to the liquidity crisis in the lending unit. DCG, one of the leaders in the cryptocurrency industry, said on January 17 that it would suspend its quarterly dividend to conserve cash. The expansion of the group’s business includes digital asset fund manager Grayscale Investments LLC.
The Grayscale Bitcoin Trust, the world’s largest crypto fund, is trading at a huge discount to the amount of cryptocurrency in its portfolio, prompting disaffected shareholders to demand changes.
Digital asset prices have fallen slightly amid recent developments in the sector. Bitcoin was down 0.10% at 5:36 AM ET, quoted at $20,920, after previously advancing as much as 1.3%. The cryptocurrency is up 27% in 2023 so far, tempering the cumulative 64% decline in 2022.
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