Crypto lender Genesis Trading files for bankruptcy protection

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Barry Silbert, Founder and CEO of Digital Currency Group

David A. Grogan | CNBC

Crypto lender Genesis filed for Chapter 11 bankruptcy late Thursday in Manhattan federal court, the latest victim of the industry contagion caused by the collapse of FTX and a major blow to the company at the center of Barry Silbert’s digital currency group.

The company has listed more than 100,000 creditors in the “mega” bankruptcy filing with combined liabilities of $1.2 billion to $11 billion, according to bankruptcy filings.

Three separate petitions were filed against the Genesis holding companies. In a statement, the company noted that the companies were only involved in Genesis’ crypto lending business. The company’s derivatives and spot trading activities will continue uninterrupted, as will Genesis Global Trading.

“We look forward to advancing our dialogue with DCG and creditor advisors as we seek to implement a path to value and best position our business for the future,” said Derar Islim, Interim CEO. Creation. Declaration.

The filing follows months of speculation that Genesis will enter bankruptcy protection and days after the Securities and Exchange Commission sued Genesis and its former partner Gemini for an unregistered offering and sale of securities.

Genesis listed a $765.9 million loan owed by Gemini in a bankruptcy filing Thursday. Other notable claims include a $78 million loan from Donut, a high-yield decentralized platform, and the VanEck Fund, which has a $53.1 million loan.

Genesis is negotiating with creditors represented by law firms Kirkland & Ellis and Proskauer Rose, sources familiar with the matter told CNBC. The bankruptcy puts Genesis alongside other collapsed crypto exchanges such as BlockFi, FTX, Celsius and Voyager.

The fall of FTX in November brought the market to a standstill and led clients to request withdrawals across the crypto landscape. The Wall Street Journal reported that Genesis filed for a $1 billion emergency bailout following the collapse of FTX, but found no interested parties. Parent company DCG, which owes more than $3 billion to creditors, suspended dividends this week, CoinDesk reported.

Crypto-contagion

Genesis has made loans to crypto hedge funds and OTC firms, but made a series of bad bets last year. severely damaged the lender and forced him to stop receiving money on November 16.

The New York-based company has made crypto loans 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 during the “crypto winter.” According to court documents, Genesis loaned more than $2.3 billion in assets to 3AC. 3AC’s creditors have been fighting in court to recover some of the billions of dollars the hedge fund once controlled.

In addition, Alameda was integral to the eventual demise of FTX. Bankman-Fried has repeatedly denied knowledge of fraudulent activities within his corporate network, but is unable to provide a meaningful explanation for the multibillion-dollar hole. He was arrested in December and is set to be released on $250 million bail pending a trial in October.

Genesis was exposed to $2.5 billion in Alameda, although that position was closed in August. After FTX filed for bankruptcy in November, Genesis Genesis said approximately $175 million in assets were “locked up” on the FTX platform.

Genesis’ financial spiral revealed Silbert’s wider DCG empire. The parent company had to assume responsibility for $1 billion from Genesis stemming from the breakup of 3AC. In a subsequent letter to investors, Silbert disclosed an additional $575 million loan from Genesis to DCG for undisclosed investment purposes.

DCG spearheaded the stock exchange listing confidence increasesallows 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 conglomerate weakened.

This is an evolving story. Check for updates.

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