DCG’s Genesis Global Files for Chapter 11 Bankruptcy
- Genesis Global Holdco, Genesis Global Capital, and Genesis Asia Pacific Pte have all filed for Chapter 11 bankruptcy in the Southern District of New York.
- Genesis co-founder Cameron Winklevoss said this move was a “crucial step” towards recovering the assets of its Earn customers.
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Troubled crypto lender Genesis has filed for Chapter 11 bankruptcy protection after failing to raise capital to resolve its liquidity crisis, the company said in a press release late on 19 January.
According to the announcement, Genesis Global Holdco and two of its lending subsidiaries — Genesis Global Capital (GGC) and Genesis Asia Pacific Pte. — have filed for Chapter 11 bankruptcy in the Southern District of New York. The filings revealed that GGC has an estimated 100,000 creditors and between $1 billion and $10 billion in both liabilities and assets, while the other two entities have between $100 million and $500 million in assets and liabilities. The interim CEO of Genesis, Derar Islim, said in a statement:
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders.”
Genesis noted the decision was taken after it held discussions with its parent company Digital Currency Group (DCG) and advisors to its creditors about the “most effective path to preserve assets and move the business forward”. Its Chapter 11 restructuring plan contemplates a “dual track process” that would pursue a “sale, capital raise, and/or an equitization transaction” that would enable the business to emerge under new ownership.
The company claimed it had more than $150 million in cash on hand, which will provide enough liquidity to supports its ongoing business operations and facilitate the restructuring process. Genesis also noted that its derivatives, spottrading, broker-dealer, and custody businesses were not part of the Chapter 11 proceedings, and will continue serving their customers.
Genesis paused withdrawals and new loan originations from its lending businesses shortly after FTX collapsed into its own bankruptcy back in November. The move had a large impact on users of the Gemini exchange yield-bearing Earn product, which used GGC as its lending partner. Shortly after Genesis filed for bankruptcy, Gemini co-founder Cameron Winklevoss tweeted that this was a “crucial step” for the exchange to recover its users assets. He also threatened to file a lawsuit against DCG and its CEO Barry Silbert if they “continue to refuse to offer creditors a fair deal”.
- A little over $13 million in altcoins were sent to crypto exchanges Binance and Coinbase in the past 24 hours, which is in accordance with a September court order.
- The court ordered a phased liquidation process, which allows the bankruptcy estate to sell $3.4 billion worth of digital assets over a certain period of time.
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- An investigation from the New York Attorney General’s office has allegedly found that Gemini was aware of Genesis’ weak financial position, but still lied to investors.
- The lawsuit is looking to ban DCG, Genesis, and Gemini from the New York financial industry, seek restitutions for investments, and the return of “ill-gotten gains”.
- The bankrupt crypto lender said that if its reorganization plan is approved, it is ready to start repaying its customers using $2 billion in BTC and ETH by the end of the year.
- If given the green light, Celsius will restart its business under the “NewCo” brand without any funded debt, and with seed funding of up to $450 million.