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Crypto Lender Genesis Faces Financial Turmoil, Bankruptcy Filing On The Horizon

Author

John Asher

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2 mins
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Author

John Asher

Tags

Reading time

2 mins
Last update

Author

John Asher

Tags

Reading time

2 mins
Last update

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Genesis Global Capital, a cryptocurrency lender, is reportedly on the brink of filing for bankruptcy which could occur as soon as this week. The company halted customer redemptions in November last year after the fall of major cryptocurrency exchange FTX.

Genesis Global Capital On The Brink of Bankruptcy

According to sources familiar with the matter, Genesis Global Capital, a cryptocurrency lender, is looking to file for bankruptcy in the coming days, as reported by Bloomberg. The lending unit of Digital Currency Group (DCG) has been holding private talks with multiple groups of creditors amid a liquidity crunch. The company warned it could seek bankruptcy protection if it fails to raise capital.

As per a letter sent to shareholders on January 17th,  DCG informed that it will be discontinuing its quarterly dividends as a measure to preserve cash, as reported by Bloomberg who viewed the letter. Additionally, CoinDesk, a crypto news site owned by DCG, confirmed to Bloomberg on Wednesday that it has retained Lazard as a financial advisor to evaluate options such as a complete or partial sale.

A report by the Block revealed that Genesis Global Capital and its creditors are in talks about a pre-arranged bankruptcy plan. The agreement would involve creditors such as Gemini, which is owned by the Winklevoss twins, agreeing to a forbearance period, during which most payments would be delayed, for a duration of one to two years, as per one of the sources. In return, creditors would receive cash payments and equity in the parent company of Genesis, Digital Currency Group.

Bankruptcy Filings Of Crypto Firms

The failure of FTX in November had several consequences, including the bankruptcy filings of crypto lender BlockFi and crypto mining company Core Scientific Inc, one of the largest publicly traded companies of its kind in the United States.

On the brink of bankruptcy, Genesis has been working to secure new funding or come to an agreement with creditors. The institutional lending unit of the company had to halt new loans and payouts due to FTX’s failure. Also, the company has incurred substantial losses of multiple hundred million dollars in the same year due to its investment in the failed crypto hedge fund Three Arrows Capital.

Genesis has a debt of over $3 billion to its creditors, including those of Gemini. To pay off this debt, its parent company, DCG is looking into selling some of its assets to generate capital. The company is evaluating the option of selling a portion of its investments, valued at around $500 million. DCG has invested in nearly 200 crypto-related projects, such as banks, exchanges, and custodians. Moreover, DCG is also under scrutiny from U.S. authorities.