Crypto lender Genesis Trading files for bankruptcy protection

Crypto lender Genesis Trading files for bankruptcy protection
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Barry Silbert, Founder and CEO of the Digital Currency Group

David A. Grogan | CNBC

Crypto lender Genesis filed for Chapter 11 bankruptcy protection in Manhattan federal court late Thursday night; This is the latest casualty in industry contagion caused by the collapse of FTX and a heavy blow to a business once at the heart of Barry Silbert’s Digital Currency Group.

The company listed more than 100,000 creditors in a “mega” bankruptcy filing, with total liabilities ranging from $1.2 billion to $11 billion, according to bankruptcy documents.

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Three separate petitions were filed for Genesis’ holding companies. In a statement, the company noted that companies are only involved in Genesis’ crypto lending business. The company’s derivatives and spot trading business will continue unhindered, as will Genesis Global Trading.

“We look forward to furthering our dialogue with DCG and our creditors’ advisors as we work to implement a path to maximize value and provide the best opportunity for our business to be well positioned for the future,” said Genesis interim CEO Derar Islim. said. and expressions.

The filing follows months of speculation about whether Genesis will go under bankruptcy protection and is just days after the Securities and Exchange Commission. sued Genesis and its one-time partner, Gemini, on the unregistered offering and sale of securities.

Genesis listed a $765.9 million loan payable from Gemini in its bankruptcy filing Thursday. Other major requests include a $78 million loan payable from Donut, a high-yielding, decentralized platform, and a VanEck fund with a $53.1 million loan due.

Genesis is in talks with creditors represented by law firms Kirkland & Ellis and Proskauer Rose, sources familiar with the matter told CNBC. Bankruptcy puts Genesis alongside other fallen cryptocurrency exchanges. Block FiFTX, Centigradeand traveler.

The downfall of FTX It froze the market in November and prompted customers to withdraw money from the crypto world. This The Wall Street Journal reported Following the bankruptcy of FTX, Genesis sought a $1 billion emergency recovery package, but could not find any interested parties. Parent company DCG, which owes more than $3 billion to creditors, suspended dividend payments this week. CoinDesk reported.

crypto contagion

Genesis has provided loans to crypto hedge funds and over-the-counter firms, but a string of bad bets have been made over the past year. seriously harmed the lender and forced it Stop withdrawals on November 16.

The New York-based firm extended its crypto loans to: Three Arrow Capital (3AC) and Alameda Research, the hedge fund started by Sam Bankman-Fried and closely linked to the FTX exchange.

3AC filed for bankruptcy In the middle of the “crypto winter” in July. According to court filings, Genesis had lent over $2.3 billion in assets to 3AC. 3AC creditors are fighting in court to reclaim even some of the billions of dollars the hedge fund once controlled.

Meanwhile, Alameda was an integral part of FTX’s eventual collapse. There is Bankman-Fried repeatedly denied Despite knowing about fraudulent activity in the network of companies, he is unable to provide any substantial explanation for it. billion dollar sticks. He was arrested in December and released on $250 million bail ahead of his trial scheduled to begin in October.

Genesis had $2.5 billion in risk to Alameda, but that position closed in august. Following FTX’s bankruptcy in November, Genesis said that approximately $175 million worth of Genesis assets were “locked” on the FTX platform.

Genesis’ financial spiral exposed Silbert’s wider DCG empire. The parent company had to take over Genesis’ $1 billion in debt resulting from the collapse of 3AC. In a later letter to investors, Silbert disclosure An additional $575 million loan from Genesis to DCG for undisclosed investment purposes.

DCG pioneered public trade trustsIt allows investors to hold Bitcoin and other currencies in their portfolios without direct exposure. Grayscale Bitcoin Trusts expanded discount to net asset value significantly Confidence in the holding decreased last year.

This is a developing story. Please check back for updates.

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