Jan 20 (Reuters) – The lending arm of cryptocurrency firm Genesis filed for bankruptcy protection from creditors on Thursday after it filed for bankruptcy alongside the likes of exchange FTX and lender BlockFi after the market crashed. .
Genesis Global Capital, one of the largest cryptocurrency lenders, announced on Nov. 16 that after FTX stunned the financial world with its bankruptcy and fueled fears that other companies could implode, customers’ Frozen redemption. The company is owned by the venture capital firm Digital Currency Group (DCG).
Genesis’ lending arm says both assets and liabilities are in the $1 billion to $10 billion range, and estimates it has more than 100,000 creditors who have filed in the Southern District of New York bankruptcy court.
Genesis Global Holdco, the parent company of Genesis Global Capital, has also filed for bankruptcy protection, along with another lending arm, Genesis Asia Pacific.
Genesis Global Holdco said in a statement that it is considering a potential sale or equity transaction to pay its creditors and has $150 million in cash to support its restructuring.
Genesis’ derivatives and spot trading, broker-dealer and custody businesses are not part of the bankruptcy process and will continue to serve clients, he added.
Genesis’ bankruptcy filing is the latest in a string of cryptocurrency bankruptcies and massive job cuts that began last year’s crash in prices.
Genesis was already in dispute with the Gemini Trust, a company founded by identical twin cryptocurrency pioneers and former US Olympic rowers Cameron and Tyler Winklevoss. The two companies are fighting over a jointly offered cryptocurrency lending product called Earn.
The Winklevoss twins say Genesis owes more than $900 million to about 340,000 Earn investors. On January 10, Cameron Winklevoss called for the dismissal of Barry Silbert, CEO of the Digital Currency Group.
About an hour after filing for bankruptcy, Cameron Winklevoss tweeted that Silbert and Digital Currency Group continue to deny creditors a fair deal.
“Unless Barry (Silbert) and DCG come to their senses and offer their creditors a fair offer, we will have imminent legal action against Barry and DCG,” Winklevoss said in his tweet thread. .
Genesis and Gemini were indicted by the US Securities and Exchange Commission on January 12th for illegally selling securities to investors through the Earn program. Tyler Winklevoss let this complaint down.
Genesis, which brokers digital assets for financial institutions such as hedge funds and asset managers, saw its total active loans fall to about $3 billion at the end of the third quarter, down from $11.1 billion a year earlier, according to its website. .
Genesis provided $130.6 billion in crypto loans and traded $116.5 billion in assets last year, according to its website.
The two biggest borrowers are Singapore-based crypto hedge fund Three Arrows Capital and trading firm Alameda Research, which has close ties to FTX, sources told Reuters. Both are in bankruptcy proceedings.
Three Arrows’ debt to Genesis was assumed by its parent company, Digital Currency Group (DCG), and subsequent claims were made against Three Arrows. DCG’s portfolio companies also include crypto asset manager Grayscale and news service CoinDesk.
Acting as de facto banks, cryptocurrency lenders have boomed during the pandemic. However, unlike traditional banks, there is no need to hold a cushion of capital. Earlier this year, collateral shortfalls left some lenders and their customers suffering large losses.
Reported by Tom Hulse of Wilmington and Akankushi, Delaware.Edited by Lanang Nguyen, Clarence Fernandez and Kim Coghill
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