Crypto lender Genesis Trading files for bankruptcy protection

Barry Silbert, Founder and CEO, Digital Currency Group

David A. Grogan | CNBC

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

The company listed more than 100,000 creditors in a “mega” bankruptcy filing, with aggregate liabilities ranging from $1.2 billion to $11 billion, according to bankruptcy papers.

Three separate petitions have been filed for the holding companies of Genesis. 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 unimpeded, as will Genesis Global Trading.

“We look forward to advancing our dialogue with DCG and our creditors’ advisors as we seek to implement a pathway to maximize value and provide the best opportunity for our business to emerge well-positioned for the future,” said Derar Islim, interim CEO of Genesis. A declaration.

The filing follows months of speculation over whether Genesis would enter bankruptcy protection, and just days after the Securities and Exchange Commission filed suit against Genesis and its former partner, Gemini, for the unregistered offer and sale of securities.

Genesis listed a $765.9 million loan payable by Gemini in Thursday’s bankruptcy filing. Other significant claims include a $78 million loan payable by Donut, a high yield decentralized platform, and a VanEck fund, with a $53.1 million loan payable.

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

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

The crypto-contagion

Genesis Has Lended To Crypto Hedge Funds And OTC Firms, But A Series Of Bad Bets Were Made In The Last Year severely damaged the lender and forced it to halt withdrawals on November 1. 16.

The New York-based company had provided crypto loans to Three Arrows Capital (3AC) and Alameda Research, the hedge fund launched by Sam Bankman-Fried and closely tied to his FTX exchange.

3AC filed for bankruptcy in July amid the “crypto winter.” Genesis had loaned more than $2.3 billion in assets to 3AC, according to court documents. 3AC’s creditors have battled in court to recover even a fraction of the billions of dollars the hedge fund once controlled.

Meanwhile, Alameda was integral to FTX’s eventual demise. Bankman-Fried has repeatedly denied knowledge of fraudulent activity within its corporate network, but remains unable to offer a substantive explanation for the multi-billion dollar hole. He was arrested in December and released on $250 million bail ahead of his trial, which is due to begin in October.

Genesis had $2.5 billion exposure to Alameda, although that position was closed in August. After FTX went bankrupt in November, Genesis said approximately $175 million in Genesis assets were “locked” to FTX’s platform.

Genesis’ financial spiral exposed Silbert’s wider DCG empire. The parent company was forced to take over liability for $1 billion from Genesis resulting 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 pioneered stock exchange listing trustsallowing investors to hold bitcoin and other currencies in their portfolio without direct exposure. Grayscale Bitcoin Trusts The discount to net asset value widened significantly last year as confidence in the conglomerate weakened.

This is a developing story. Please check for updates.

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