Crypto Lender Froze Client Assets in November
More than two months after it froze customer assets, crypto lender Genesis has filed for Chapter 11 bankruptcy.
Genesis Global Holdco, LLC and two lending subsidiaries – Genesis Global Capital and Genesis Asia Pacific Pte. Ltd. – filed for bankruptcy in the Southern District of New York. Genesis’ derivatives and spot trading businesses are not included in the filings.
Genesis, a subsidiary of crypto conglomerate Digital Currency Group, was once one of the largest crypto lenders. In the fourth quarter of 2021, it originated $50B in loans.
But Genesis was caught off guard by the collapses of crypto hedge fund Three Arrows Capital in June and crypto exchange FTX in November. It is among Three Arrows’ largest creditors, owed more than $1B, according to court records. It also held more than $175M on FTX when the exchange filed for bankruptcy.
Since then, Genesis leadership has explored the possibility of making its own bankruptcy filing, according to news reports.
Genesis’ bankruptcy proposal would seek to raise money through a sale or capital raise. Should it fail, it would give creditors an ownership stake in a “reorganized” Genesis.
Barry Silbert, a Wall Street veteran and CEO of parent company DCG, has been under enormous pressure to find a solution.
About 34,000 customers of Gemini Earn, a product offered by crypto exchange Gemini, cannot withdraw some $900M entrusted to Genesis. Gemini co-founder Cameron Winklevoss has accused Silbert of fraud.
Winklevoss and Silbert Trade Blows as Fraud Accusations Fly
DCG Boss Rejects Gemini CEO’s Accusations of Accounting Fraud
The Securities and Exchange Commission, meanwhile, has sued Genesis and Gemini, alleging that the Earn product was an unregistered security.
SEC Charges Gemini and Genesis With Selling Unregistered Securities
Agency Targets Gemini’s Earn Product as War of Words Escalates Between Winklevoss and Silbert
According to court documents, Gemini is Genesis’ largest creditor, owed $765M.
Winklevoss called the filing a “crucial step towards us being able to recover [Earn] assets.”
But he has continued his war with Silbert after calling for his termination in an open letter at the beginning of the month.
“The decision to put Genesis into bankruptcy does not insulate Barry, DCG, and any other wrongdoers from accountability,” he wrote on Twitter. “Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently.”
UPDATED on 1/20 @ 3PM ET to include details of Genesis’ bankruptcy filing.