Genesis Global Trading has filed for bankruptcy after months of uncertainty over the state of its assets.
The crypto lending company was a major FTX client that unraveled in the aftermath of the crypto exchange’s collapse. A lender of high-risk and often unsecured loans, Genesis had warned of possible insolvency as early as November, when it halted operations. Later that month, another crypto lender, BlockFi, folded.
Genesis has been reportedly working on a “prepackaged” bankruptcy deal where creditors would agree to a forbearance period of between one and two years in exchange for cash payments and equity in its parent company Digital Currency Group (DCG), according to The Block.
The news comes just over a week after the Securities and Exchange Commission (SEC) charged Genesis and Gemini cryptocurrency exchange, founded by twins Tyler and Cameron Winklevoss, for illegally selling securities to investors through their Gemini Earn lending programs. The program allowed Gemini users to lend their crypto assets through Genesis and were promised to earn up to 8% in interest. By the time Genesis halted operations in November, it held $900 millions in Gemini clients’ funds, which have since been the subject of contention between the two companies. The Gemini Earn program was shut down earlier this month.
Cameron openly condemned Barry Silbert, the CEO of Genesis parent company DCG, for the alleged mishandling of Gemini clients’ funds. On Jan. 2, the Gemini co-founder wrote a strongly worded open letter to Silbert, accusing him of engaging in “bad faith stall tactics” and hiding behind “lawyers, investment bankers, and process” instead of getting in a room together to “hash out a resolution.”
“The idea in your head that you can quietly hide in your ivory tower and that this will all just magically go away, or that this is someone else’s problem, is pure fantasy. To be clear, this mess is entirely of your own making,” he wrote. Cameron then issued a second missive on Jan. 10, demanding Silbert step down as DCG’s chief.
Even after the SEC held both firms responsible in its Jan. 12 suit, Gemini kept pointing the finger at Genesis. “Gemini and other creditors are working hard together to recover funds,” Tyler tweeted. “This action does nothing to further our efforts and help Earn users get their assets back. Their behavior is totally counterproductive.” He called the lawsuit a “manufactured parking ticket.”
For his part, Silbert has dismissed the Winklevoss brothers’ statements as a “desperate publicity stunt.”
$3.4 billion: Amount Genesis’s top 50 unsecured loans amount to
30%: Share of its workforce Genesis laid off in the first week of January, shrinking its staff down to 145 people
$1 billion: Value of the emergency loans Genesis sought shortly after the implosion of Alameda, the crypto hedge fund owned by FTX’s founder Sam Bankman-Fried that was part of the alleged fraud, and before it froze redemptions
$1.675 billion: How much Cameron Winklevoss, a Genesis client and CEO of crypto exchange Gemini, said DCG owes to Gemini customers and other Genesis creditors. Silbert has disputed this claim
$765.9 million: Amount of debt Genesis owes Gemini, according to its Chapter 11 filing
340,000: Earn’s users defrauded according to a Jan. 10 open letter by Geminis’s Cameron Winklevoss
$900 million: Gemini Earn customers funds locked, and possibly lost
100,000: Creditors listed in Genesis’ Chapter 11 bankruptcy protection
$1.2 billion to $11 billion: Range of liabilities listed in its Chapter 11 filing
More than $150 million: Cash Genesis claims to have on hand, “which will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process”
“The recent collapse of crypto asset lending programs and the suspension of Genesis’ program underscore the critical need for platforms offering securities to retail investors to comply with the federal securities laws. As we’ve seen time and again, the failure to do so denies investors the basic information they need to make informed investment decisions. ” —Gurbir S. Grewal, director of the SEC’s division of enforcement