Barry Silbert, Founder and CEO, Digital Currency Team
David A. Grogan | CNBC
Cryptocurrency lender Genesis filed for Chapter 11 bankruptcy protection Thursday night in Manhattan federal court, the latest victim in the industry contagion caused by the collapse of FTX and a a blow to a business that was once at the heart of Barry Silbert’s Digital Currency Group.
The company listed more than 100,000 creditors in a “massive” bankruptcy filing, with total liabilities ranging from $1.2 billion to $11 billion, according to the bankruptcy filing.
Three separate lawsuits were filed against Genesis’ holding companies. In a statement, the company noted that the companies are only engaged in Genesis’ crypto lending business. The company’s spot and derivatives trading business will continue unhindered, as will Genesis Global Trading.
Genesis Interim CEO Derar Islim said: “We look forward to fostering dialogue with DCG and its creditor advisors as we seek to execute on a path of value maximization and opportunity creation. the best opportunity for our business to develop in a good position in the future”. statement.
The filing follows months of speculation over whether Genesis will receive bankruptcy protection and just days after the Securities and Exchange Commission File a lawsuit against Genesis and its one-time partner, Gemini, for the offering and sale of unregistered securities.
Genesis listed a $765.9 million loan payable from Gemini in its bankruptcy filing on Thursday. Other major claims include a $78 million loan payable from Donut, a decentralized, high-yield platform, and the VanEck fund, with a $53.1 million loan payable.
Gemini co-founder Cameron Winklevoss initially responded to the news on Twitter, writing that Silbert and DCG “continue to refuse to offer creditors a fair settlement.”
“We are preparing to take direct legal action against Barry, DCG and others,” he continued.
Winklevoss concludes: “Sunlight is the best disinfectant.
Genesis is in talks with creditors represented by the law firms Kirkland & Ellis and Proskauer Rose, sources familiar with the matter told CNBC. Bankruptcy puts Genesis alongside other crypto exchanges including BlockFiFTX, poisonand Astronauts.
the collapse of FTX in November froze the market and caused customers around the world of crypto to seek withdrawals. The The Wall Street Journal reported that, following the FTX crisis, Genesis sought a $1 billion emergency bailout, but found no interested parties. Parent company DCG, which owes creditors more than $3 billion in debt, suspended its dividend this week, CoinDesk reported.
The spread of cryptocurrencies
Genesis has provided loans to crypto hedge funds and decentralized companies, but a series of bad bets were made last year. serious damage to the lender and force it to suspend withdrawals on November 16.
New York-based company has extended crypto loans to Three capital arrows (3AC) and Alameda Research, the hedge fund founded by Sam Bankman-Fried and closely affiliated with his exchange FTX.
3AC filed for bankruptcy in July in the middle of “crypto winter”. Genesis lent 3AC more than $2.3 billion in assets, according to court filings. 3AC’s creditors have fought in court to recover even a fraction of the billions of dollars the hedge fund once controlled.
Meanwhile, Alameda was an integral part of FTX’s eventual demise. Bankman-Fried has rejected many times knew of fraudulent activity in its network of companies, but was still unable to provide a substantial explanation for loss of billions of dollars. He was arrested in December, and released on a $250 million bond ahead of his trial, which is scheduled to begin in October.
Genesis has a $2.5 billion investment in Alameda, even though that position is Closed in August. After FTX’s bankruptcy in November, Genesis said about $175 million in Genesis assets were “locked” on FTX’s platform.
Genesis’ financial spiral exposed Silbert’s broader DCG empire. The parent company was forced to take on Genesis’ $1 billion in debt due to the collapse of 3AC. In a later letter to investors, Silbert disclosure $575 million additional loan from Genesis to DCG for undisclosed investment purposes.
DCG pioneers public trading Commissionallows investors to hold bitcoin and other currencies in their portfolio without direct exposure. Grayscale Bitcoin Trust’s extended discount to net worth significantly last year when confidence in the corporation waned.
This is an evolving story. Please check back for updates.
