Friday, February 23, 2024

Crypto Lender Genesis Files for Bankruptcy as Crisis Spreads

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Cryptocurrency lender Genesis Global Holdco LLC filed for bankruptcy, the latest firm to collapse in the aftermath of the FTX exchange’s swift downfall and last year’s rout in digital assets. The company, plus subsidiaries Genesis Global Capital LLC and Genesis Asia Pacific Pte, filed for Chapter 11 protection on Thursday in the Southern District of New York, the court document show. Genesis Global Capital listed the same range, $1 billion to $10 billion, for both assets and liabilities as well as over 100,000 creditors, the top 50 unsecured claims amount to about $3.4 billion.

What is Genesis?

Genesis is a full-service digital currency prime brokerage providing a single point of access for select qualified individuals and global institutional investors. Genesis combines unrivalled operational excellence, a seamless user experience, and best-in-class client service to provide the full suite of services that global investors require to manage their digital asset portfolios. The firm offers sophisticated market participants a fully integrated platform to trade, borrow, lend, and custody digital assets, creating new opportunities for yield while increasing capital efficiency for counterparties.

Genesis Global Capital, one of three Genesis entities that applied for bankruptcy protection on Thursday, froze customer withdrawals on 16 November, days after FTX made its own chapter 11 filing. The lender said it had assets and liabilities in the range of $1bn to $10bn, and estimated it had more than 100,000 creditors in its filing with the US bankruptcy court for the southern district of New York. Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit, Genesis Asia Pacific. Genesis Global Holdco said options under consideration included a sale and that it had $150m in cash to support the restructuring. Under a Chapter 11 process, a struggling company is sheltered from creditors temporarily while it attempts to reorganise its finances.

Last year, Genesis extended $130.6bn in crypto loans and traded $116.5bn in assets, according to its website. Its two biggest borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company closely affiliated with FTX. Three Arrows, Alameda and FTX are in bankruptcy proceedings. Three Arrows’ debt to Genesis was assumed by its parent company, the venture capital firm Digital Currency Group (DCG), which then filed a claim against Three Arrows. DCG’s portfolio companies also include the crypto asset manager Grayscale and news service CoinDesk.

However, the price of bitcoin, the cornerstone crypto asset, has recovered since the FTX collapse and is trading above $20,000 after hovering at about $17,000 after one its rivals crashed. Bitcoin’s price was $20,946 on Friday morning, up nearly 1%.

“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Derar Islim, Interim CEO, Genesis. “We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution.”

Paul Aronzon, an independent director at Genesis. “We look forward to advancing our dialogue with DCG and our creditors’ advisors as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future.”

“We have crafted a deliberate process and roadmap through which we believe we can reach the best solution for clients and other stakeholders,”

Genesis’s derivatives and spot trading, broker dealer and custody businesses were not engaged in the bankruptcy process, and would continue their client trading operations, the holding company said.

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