Cryptocurrency lender Genesis Global filed for bankruptcy on Jan. 19, making it the latest company to do so following the collapse of FTX in November.
The lender announced it had filed for Chapter 11 bankruptcy protection in a press release, stating that the move was part of “strategic actions to achieve a global resolution to maximize value for all clients and stakeholders and strengthen its business for the future.”
The company previously announced that it had been holding ongoing discussions with advisers to its creditors to evaluate the best way to preserve assets and continue with the business.
“Genesis has now commenced a court-supervised restructuring process to further advance these discussions and reach a holistic solution for its lending business, which, if achieved, would provide an optimal outcome for Genesis clients and Gemini Earn users,” the company said.
Genesis Global Holdco and two of its lending business subsidiaries, Genesis Global Capital and Genesis Asia Pacific Pte. Ltd., filed the voluntary bankruptcy petitions in Manhattan federal court.
It noted that the companies were only involved in Genesis’s crypto lending business, adding that the derivatives, spot trading, broker-dealer, and custody businesses of Genesis are not part of the Chapter 11 proceedings and will continue client trading operations.
Genesis Hit Hard by ‘Extraordinary Challenges’
According to the company, the bankruptcy is part of a “roadmap to an exit” plan that Genesis has devised.The plan “contemplates a dual track process in pursuit of a sale, capital raise and/or equitization transaction that would enable the business to emerge under new ownership.”
Genesis said it will begin a marketing and sale process to monetize its assets or otherwise raise capital and use the transaction proceeds to pay creditors “fairly and equitably.”
Additionally, the crypto lender said it intends to use $150 million of cash on hand to fund its ongoing operation and facilitate the restructuring process, which will be led by an independent special committee, during bankruptcy proceedings.
Derar Islim, the company’s interim CEO, noted that Genesis has been impacted by the “recent extraordinary challenges” facing the cryptocurrency industry, including the default of Three Arrows Capital and the bankruptcy of FTX.
FTX, led by Sam Bankman-Fried, filed for Chapter 11 bankruptcy in November 2022 amid a liquidity crisis.
Bankman-Fried, who was arrested in December, pleaded not guilty to charges of fraud, conspiracy, campaign finance law violations, and money laundering in January.
He is scheduled to go on trial in October.
SEC Files Charges Against Genesis, Gemini
The firm’s announcement regarding the bankruptcy filing comes shortly after the Securities and Exchange Commission (SEC) filed charges against Genesis and crypto exchange Gemini, which is run by billionaire twins, Tyler and Cameron Winklevoss.The SEC alleges that the two companies partnered up to sell unregistered securities to retail investors through the Gemini Earn crypto asset lending program.
In November, Genesis announced that it would not allow its Gemini Earn investors to withdraw their crypto assets because Genesis lacked sufficient liquid assets that enabled it to do so amid a volatile crypto market prompted by the collapse of FTX.
That, the SEC says, led to customers losing millions; at the time Genesis held approximately $900 million in investor assets from 340,000 Gemini Earn investors.
“Through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors,” the SEC said. “Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”
On Twitter on Thursday, Gemini co-founder Cameron Winklevoss said the company has been “working around the clock to negotiate an acceptable solution” but that Digital Currency Group (DCG), the parent company of Genesis, and its CEO Barry Silbert “continue to refuse to offer creditors a fair deal.”
“The good news is that, by seeking the protection of the bankruptcy court, Genesis will be subject to judicial oversight and be required to provide discovery into the machinations that brought us to this point,” Winklevoss said.
Winklevoss added that Gemini is preparing to take legal action against DCG, Silbert, and others who he said “share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.”
The Epoch Times has contacted Genesis for comment.
Genesis is the latest company to file for bankruptcy after FTX, Celsius, BlockFi, and Voyager did so over the past year.
