Crypto lender Genesis Trading files for bankruptcy protection

Barry Silbert, founder and CEO of Digital Currency Group

David A. Grogan | cnbc

Cryptocurrency lender Genesis filed for Chapter 11 bankruptcy protection late Thursday in Manhattan federal court, the latest casualty of the industry to be dealt a crippling blow to a business once at the heart of the FTX collapse and Barry Silbert’s digital currency conglomerate.

According to bankruptcy documents, the company listed more than 100,000 creditors in the “mega” bankruptcy filing, with total liabilities ranging from $1.2 billion to $11 billion dollars.

Three separate petitions were filed for the holding companies of Genesis. The companies were only involved in the crypto lending business of Genesis, the company said in a statement. The derivatives and spot trading business of the company, like Genesis Global Trading, will continue uninterrupted.

Derar Islam, Interim CEO of Genesis, said, “We look forward to continuing our discussions with DCG and our creditors’ advisors as we seek to implement a path forward to maximize value and position our business for the future. We want to provide you with the best possible opportunity to emerge well.” a statement.

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The filing follows months of speculation about whether Genesis would enter bankruptcy protection, and just days after the Securities and Exchange Commission filed a lawsuit against Genesis and its onetime partner, Gemini, over the unregistered offering and sale of securities.

Genesis listed $765.9 million in debt owed by Gemini in Thursday’s bankruptcy filing. Other large claims include a $78 million loan outstanding from Donut, a high-yield, decentralized platform, and a VanEck fund with $53.1 million in debt outstanding.

Gemini co-founder Cameron Winklevoss initially responded to the news on Twitter, writing that Silbert and DCG “continue to refuse to offer creditors a fair deal.”

“We are preparing to take direct legal action against Barrie, DCG and others,” he continued.

“Sunlight is the best disinfectant,” Winklevoss concluded.

Sources familiar with the matter told CNBC that Origin is in talks with creditors represented by law firms Kirkland & Ellis and Proskauer Rose. The bankruptcy puts Genesis alongside other fallen crypto exchanges including BlockFi, FTX, Celsius and Voyager.

The collapse of FTX in November brought the market to a halt and prompted clients across the crypto landscape to seek exits. The Wall Street Journal reported that, following the FTX meltdown, Genesis sought a $1 billion emergency bailout, but found no interested parties. CoinDesk reported that parent company DCG, which owes creditors more than $3 billion in debt, suspended dividends this week.

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crypto fingering

Genesis provided loans to crypto hedge funds and over-the-counter firms, but made a series of bad bets last year severely harming the lender and forcing it to stop withdrawals on 16 November.

The New York-based firm had extended the crypto loan to Three Arrows Capital (3AC) and Alameda Research, a hedge fund started by Sam Bankman-Fried and closely linked to its FTX exchange.

3AC filed for bankruptcy in July in the midst of a “crypto winter”. According to court filings, Genesis loaned more than $2.3 billion in assets to 3AC. 3AC creditors are fighting in court to recover even a piece of the billions of dollars the hedge fund once controlled.

Meanwhile, Almeida was integral to FTX’s eventual demise. Bankman-Fried has repeatedly denied knowledge of fraudulent activity within its net of companies, but has been unable to provide an adequate explanation for the billion-dollar hole. He was arrested in December, and released on $250 million bond ahead of his trial, which is set to begin in October.

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Genesis had a $2.5 billion investment in Alameda, although that position was closed in August. Following the FTX bankruptcy in November, Genesis said approximately $175 million of Genesis assets were “locked up” on FTX’s platform.

Origin’s financial spiral has exposed Silbert’s sprawling DCG empire. The parent company was forced to take on Genesis’ $1 billion liability stemming from the collapse of 3AC. In a subsequent letter to investors, Silbert disclosed an additional $575 million loan from Genesis to DCG for undisclosed investment purposes.

DCG publicly traded trustsAllows investors to hold bitcoin and other currencies in their portfolio without direct exposure. Grayscale Bitcoin Trust The discount to net asset value widened significantly last year as confidence in the group waned.

This is a developing story. Please check back for updates,

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