Genesis Bankruptcy Filing is Impending as Creditor Negotiations Fail
According to several reports, Genesis, a Digital Currency Group’s subsidiary that deals in crypto lending, is about to file for bankruptcy protection following failed negotiations with its creditors. Bloomberg’s undisclosed source said the bankruptcy filing could come before Friday this week.
The crypto lender had previously warned of this move in November 2022 after it halted withdrawals from the platform following the sudden downfall of FTX, a crypto exchange. At that time, Genesis’ trading arm revealed it had nearly $180 million locked in its FTX account.
Bloomberg reports that Genesis and its parent firm have offered multiple proposals to creditors in an attempt to reach an agreement with them, but the firms’ efforts have failed. The Block says that Genesis and the creditors will discuss a bankruptcy plan Today.
According to The Block’s unnamed source, the proposed deal would see Creditors consent to a forbearance period of three years on payments, then receive equity and cash from Digital Currency Group as part of the deal. However, genesis is yet to confirm any of these reports.
Genesis Blames FTX’s Collapse for Its Financial Troubles
FTX caused an industry contagion that left holes in many crypto firms’ balance sheets. One of the most affected firms is Genesis. The crypto lender’s debt is worth $3 billion. About $900 million of the total debt is owed to Gemini, a crypto exchange.
Gemini runs an Earn program allowing users to earn interest in their deposited crypto. However, ever since Genesis halted withdrawals, Gemini Earn users have lacked access to their funds, leading to a heated exchange of words between Gemini co-founders and Digital Currency Group CEO.
The Winklevoss twins, the co-founders of Gemini, have recently demanded the Digital Currency Group CEO, Barry Silbert, resign. Additionally, Gemini and Genesis have been charged with offering unregistered securities in regard to the Gemini Earn product by the Securities and Exchange Commission.
Digital Currency Group Seeks to Sell Its Stakes to Cover Genesis Deficit
Derar Islim, the Genesis Interim CEO, still insists that the company needs extra time to fix its liquidity problems even after firing 30% of its workforce. Furthermore, its parent firm is considering selling stakes that it holds in over 150 crypto projects to save Genesis from its financial crisis.
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