The Genesis Global Holdco bankruptcy filing plunged Fairfax County pension funds into crisis, with the VanEck fund listed as one of the crypto lender’s creditors. The filing by Genesis Global Holdco on Thursday, January 19 cited the exposure to collapsed FTX crypto exchange. The filing indicated that the situation worsened the firm’s operations, already bleeding following the downfall of hedge fund Three Arrows Capital.
Fairfax County Funds Exposed to Genesis Global Bankruptcy
The revelation made by Genesis indicated that the top-ranked creditors are owed $3.5 billion. The list features a creditor linked with the $6.8 billion pension fund system operated from Fairfax County in Virginia.
Documents submitted during the Thursday bankruptcy filing captured the New Finance Income Fund’s $53 million claim with ties to VanEck, a leading global asset manager. Started in December 2021, the fund deploys a short-term lending approach to crypto-related entities. VanEck reveals on its website that lending to digital-asset firms accomplishes high yields.
VanEck dominated the media headlines in July 2022 when the Fairfax County Police Officers Retirement System and the Fairfax County Employees’ Retirement System constituted part of the $6.8 billion Fairfax pension system and committed $35 million to the fund.
High Yield Strategy Deployed by VanEck
Explaining the move, investing in VanEck fund and Parataxis Capital constituted the county’s funds’ new yield strategy. Unknown to the two funds, the combined investment in the VanEck would expose them to Genesis Global, which filed for Chapter 11 bankruptcy protection last week.
The exposure to Genesis Global bankruptcy is inevitable to the Fairfax County Police Officers Retirement System since it has always sustained a pro-crypto strategy since 2019. The fund’s chief investment officer Katherine Molnar confessed that the retirement system has always accommodated cryptos in its portfolio, estimated to hit $1.8 billion.
Although extremely rare, the fund announced committing $50 million within the blockchain fund initiated by Morgan Creek Capital. Molnar’s explanation matches the Forbes revelation of the CFA Institute report in 2022 that 94% of the state’s pension plans were investing in cryptos.
The Forbes’ report added that the affinity to digital assets is driven by the desire to attain higher yields, unlike corporate-defined contributions and benefit plans. Volatility in the crypto market in 2022 eroded the targeted yields leaving the Fairfax funds engulfed in the Genesis bankruptcy crisis.
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