Genesis’ Crypto lending businesses files for bankruptcy protection

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By Stephen AlpherDanny Nelson, Condesk

20th January 2023 – (January) Genesis Global Holdco LLC, the parent company of troubled cryptocurrency lender Genesis Global Capital, filed for Chapter 11 bankruptcy protection after being pummelled by two of 2022’s biggest industry collapses.

Genesis Global Holdco, LLC and its subsidiaries Genesis Asia Pacific Pte. Ltd and Genesis Global Capital, LLC filed a trio of voluntary petitions with the bankruptcy court. All three fall under the umbrella of Digital Currency Group, which also owns CoinDesk. Genesis has moved for joint administration of the cases.

In its filing, Genesis Global Capital, the partner firm to Gemini’s defunct Earn program, estimated more than 100,000 creditors and between $1 billion and $10 billion in liabilities, as well as assets. The two other entities estimated their assets and liabilities in the $100 million and $500 million range, respectively.

Those companies comprise Genesis’ crypto lending business that was rocked last year by the implosions of hedge fund Three Arrows Capital and crypto exchange FTX. Genesis’ other subsidiaries involved in the derivatives and spot trading and custody businesses as well as Genesis Global Trading were not included in the filing and continue client trading operations, according to a press release.

In its filing, Genesis Global Capital said it expects that through the restructuring process, there will be money left over to pay unsecured creditors – a group that can get wiped out in bankruptcy cases if the situation is extremely dire.

Shortly after FTX collapsed into its own bankruptcy case in November, Genesis Global Capital was forced to suspend customer withdrawals, which hurt customers of a yield product offered by the Winklevoss twins’ crypto exchange, Gemini.

Genesis had been scrambling to raise fresh capital or reach a deal with creditors. It – along with parent company Digital Currency Group (DCG), which also owns CoinDesk – was under increasing pressure to make good on $900 million of locked deposits.

The bankruptcy “is a crucial step towards us being able to recover your assets,” Gemini’s Cameron Winklevoss tweeted shortly after the filing was announced.

Genesis late last year retained investment bank Moelis & Co. to assist with exploring options.

Before FTX dealt a blow to Genesis, the failure of crypto hedge fund Three Arrows Capital had caused hundreds of millions of dollars in losses for the firm, CoinDesk reported first last year.

Earlier this month, Genesis announced it was laying off 30% of its staff, taking it down to 145 employees.

Thursday’s bankruptcy filing could have broader implications for bitcoin as Genesis and digital assets manager Grayscale share the same parent company in DCG. Grayscale operates the Grayscale Bitcoin Trust (GBTC), which has $10 billion-plus in assets under management and was late last year trading at a record discount to net asset value, although that discount has narrowed recently. There are market fears that the repercussions of the Genesis bankruptcy could somehow lead to the liquidation of GBTC’s holdings of 600,000+ bitcoin.

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