DeFiJan 19, 2023

Genesis going bankrupt later this week? Crypto lender in trouble

Another project related to digital currencies has problems with financial liquidity.

The cryptocurrency market may be experiencing a slight revival recently, and investors' moods are getting a bit brighter, but the cryptocurrency winter is in full swing. One of its symbols is a series of collapses of powerful companies in the cryptocurrency sector. Now, a cryptocurrency lender, Genesis, can join the group of such entities.

Will Genesis fall?

On January 18, Bloomberg published a report suggesting that Genesis Global Capital is about to file for bankruptcy. Genesis is a cryptocurrency lender that is a subsidiary of another company - Digital Currency Group (DCG). This one is a cryptocurrency VC fund that has already invested in 200 entities from the digital currency sector. What's more, this week it announced the suspension of dividend payments to its shareholders until further notice. It is about problems with maintaining adequate financial liquidity.

As reported by Bloomberg, Genesis is reportedly considering filing for bankruptcy if they ultimately fail to raise the appropriate amount of funds after financial troubles arise. These troubles are a consequence of the collapse of the FTX cryptocurrency exchange. The authors of the report, citing people familiar with the matter, claim that Genesis may declare its bankruptcy later this week. The company owes creditors as much as $3 billion.

Earlier, on January 12, the US Securities and Exchange Commission filed a lawsuit against Genesis and the Gemini cryptocurrency exchange. Both entities were accused of offering unregistered securities to investors through the Gemini "Earn" program.

The Genesis case is more complex

Gemini CEO Cameron Winklevoss wrote in an open letter to Digital Currency Group board members that Genesis owes them $900 million. He also attacked SCG president Barry Silbert and demanded his dismissal.

The accused company responded by saying that Winklevoss' accusations were "malicious, false and degrading attacks".

However, the matter is more complex. Well, the current bear market is characterized by the domino effect of the collapse of large entities from the cryptocurrency market. After the collapse of the Terra ecosystem in May 2022, the Three Arrows Capital (3AC) fund announced its bankruptcy less than two months later.

Barry Silbert told his shareholders in early January that 3AC owed Genesis $447.5 million and 4,550 bitcoins. The value of BTC at that time was around $78 million.

Moreover, Genesis previously held $175 million worth of assets on the FTX cryptocurrency exchange before it collapsed in November 2022. This element of the domino chain was instrumental in fueling the Genesis liquidity crisis and their potential insolvency.

If Genesis files for bankruptcy, it will join the ranks of Terraform Labs, Voyager Digital, Celsius Network, Three Arrows Capital, FTX and BlockFi. All entities collapsed spectacularly during the last year.