Genesis is the latest company in the cryptocurrency industry to file for bankruptcy in the wake of the high-profile FTX bankruptcy filing in November 2022. The filings submitted by the company estimate that it has between USD 1 billion and USD 10 billion in assets and between USD 1 billion and USD 10 billion in liabilities.
Estimates also suggest that it has more than 100,000 creditors. According to Yahoo, a court document file showed Genesis held USD 5.1 billion in liabilities in the weeks following its withdrawal freeze on 16 November 2022. A wholly owned subsidiary of the Digital Currency Group (DCG), genesis incurred losses in June 2022, and it became unable to carry on its operations following the downfall of FTX.
Genesis was founded in 2013 and launched its lending business in March 2018. Even though it recorded considerable success in the following years, the downfall of the crypto market and the fact that Three Arrows Capital defaulted on USD 1.2 billion borrowed from Genesis contributed to its current predicament.
In August 2022, the company laid off 20% of its staff as part of a reorganisation effort. A few months after that, Genesis suspended loan redemptions and originations in the context of abnormal withdrawal requests and market dislocation following the FTX debacle. This caused crypto exchange Gemini to also close down its Earn program, which allowed Gemini customers to lend their crypto assets to Genesis at an eye-catching interest rate.
On 12 January 2023, The Securities and Exchange Commission charged Genesis Global Capital and Gemini Trust Company for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending programme. According to the SEC, Genesis and Gemini used the programme to raise billions of dollars’ worth of crypto assets from hundreds of thousands of investors.
In the same month, Genesis further laid off 30% of its staff and failed to get a hold of additional outside capital. According to Yahoo, Genesis owes more than USD 3.4 billion to its top creditors. This includes loans payable to the New Finance Income Fund (USD 53 million), DCG (USD 37.9 million), Caramila Capital Management (USD 21.5 million), Big Time Studios (USD 20 million), crypto trading outfit Cumberland (USD 18.7 million), and Development Foundation (USD 13 million).
According to coindesk.com, the Genesis trading division has remained out of Chapter 11 and is still moving money around. To be specific, a wallet controlled by the Genesis OTC trading desk sent around USD 125 million of ETH, FTM, and USDT to Coinbase, Binance, Bitstamp, and Kraken on the same day of the Genesis bankruptcy filing.
Digital Currency Group’s (DCG) representatives pledged that the Genesis trading business will continue to operate normally, but it’s still too early to tell how Genesis’ bankruptcy will affect its auxiliary businesses in the long run.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now