Barry Silbert, Founder and CEO, Digital Currency Group
David A. Grosjean | CNBC
Cryptocurrency lender Genesis filed for Chapter 11 bankruptcy protection late Thursday night in Manhattan federal court, the latest casualty in the industry contagion caused by the collapse of FTX and a crippling blow to the business at the heart of Barry Silbert’s crypto conglomerate.
The company listed more than 100,000 creditors in a “massive” bankruptcy filing, with total liabilities ranging from $1.2 billion to $11 billion, according to bankruptcy documents.
Three separate petitions were filed with the Genesis Holding Companies. In a statement, the company indicated that the companies were only involved in Genesis’ cryptocurrency lending business. The company’s derivatives and spot trading business will continue unhindered, as will Genesis Global Trading.
“We look forward to strengthening our dialogue with DCG and our creditor advisors as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future,” said Genesis interim CEO Dirar Islam. Permit.
The filing follows months of speculation about whether Genesis will enter bankruptcy protection, and just days after the Securities and Exchange Commission filed suit against Genesis and its former partner, Gemini, over an unregistered offering and sale of securities.
Genesis listed a $765.9 million loan payable from Gemini in its bankruptcy filing Thursday. Other large claims included a $78 million loan payable from Donut, a high-yield decentralized platform, and VanEck Fund, with a $53.1 million loan payable.
Gemini co-founder Cameron Winklevoss initially responded to the news on Twitter, writing that Silbert and DCG “continue to refuse to offer creditors a fair deal.”
He continued, “We were preparing to take direct legal action against Barry, DCG, and others.”
“Sunlight is the best antiseptic,” Winklevoss concluded.
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 cryptocurrency exchanges including BlockFi, FTX, Celsius, and Voyager.
The November crash of FTX froze the market and led clients across the cryptocurrency scene to seek withdrawals. The Wall Street Journal reported that in the aftermath of the FTX collapse, Genesis sought a $1 billion emergency bailout, but found no interested parties. CoinDesk reported that parent company DCG, which owes creditors a growing debt of more than $3 billion, has suspended its dividend this week.
Genesis has provided loans to crypto hedge funds and over-the-counter companies, but a series of bad bets were made last year It severely damaged the lender and forced it to halt withdrawals on November 16th.
The New York-based company has provided cryptocurrency loans to Three Arrows Capital (3AC) and Alameda Research, the hedge fund started by Sam Bankman-Fried that is closely associated with its FTX exchange.
3AC filed for bankruptcy in July in the midst of the “crypto winter.” Genesis had loaned more than $2.3 billion in assets to 3AC, according to court filings. 3AC’s creditors have been fighting 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 still cannot provide a substantive explanation for the multibillion-dollar hole. He was arrested in December and released on $250 million bail ahead of his trial, which is set to begin in October.
Genesis had $2.5 billion exposure to Alameda, even though that position closed in August. After FTX’s bankruptcy in November, Genesis said about $175 million of Genesis assets were “locked” on the FTX platform.
Genesis’ financial whirlpool exposed Silbert DCG’s broader empire. The parent company was forced to take over the $1 billion Genesis generated by 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 general circulation trustallowing investors to hold bitcoins and other currencies in their wallets without direct exposure. Grayscale bitcoin box The discount to net asset value widened dramatically last year as confidence in the conglomerate waned.
This is a developing story. Please check back for updates.