Genesis Global Capital has no other option left but files for bankruptcy after it failed to raise capital. The crypto firm’s negotiations with creditors failed to move forward.
Reports state that Genesis is preparing to file for bankruptcy protection as soon as this week. The troubled firm had warned of this in November 2022 when it suspended client withdrawals following the collapse of FTX crypto exchange. The firm had $17.5 million worth of cryptocurrency locked up in Sam Bankman-Fried’s crypto exchange. It should be noted that FTX is also going through bankruptcy proceedings and facing several lawsuits.
Genesis’s parent company Digital Currency Group (DCG) has been unsuccessful in reaching an agreement with creditors. As such, they are now looking at a Chapter 11 bankruptcy plan. Creditors, in the proposed deal, would agree to a forbearance period of between one and two years on payments, and receive cash and equity from DCG.
Moreover, Gemini accused Genesis of holding more than $900 million worth of customer funds from its Gemini Earn program. Cameron Winklevoss, the co-founder of Gemini, claims Genesis lent $2.36 billion to Three Arrows Capital (3AC) hedge fund on extremely lenient conditions. 3AC went into bankruptcy following the collapse of Terra’s stablecoin USDT. This left a $1.2 billion hole in Genesis’ loan book. Winklevoss said Genesis and 3AC were engaged in a swap transaction of sorts to the benefit of DCG which invested the funds in the GBTC shares from being sold in the open market. This depressed the trust’s share price.
This illicit swap trade made Genesis’ balance sheet look healthier than in reality.
