The rumor swells for several weeks, but the possibility of a bankruptcy filing of Genesis seems more and more concrete after the latest revelations about the potential bankruptcy of the giant. Indeed, according to sources familiar with the matter, the creditors of Genesis Global are currently negotiating a pre-established bankruptcy plan with the company’s leaders. As a reminder, the lender crypto owes over $3 billion to creditors. Here is the status report.
Mounting issues for Genesis and parent company DCG
Notably, the report comes days after Digital Currency Group (DCG), the parent company of Genesissuspended the dividends quarterly. It was a way to preserve liquidity and reduce operating costs. Moreover, the crypto lending platform is in conflict with its subsidiary Gemini, a major US crypto exchange, since the start of the year. The cause of the friction is the suspension of withdrawals on Genesisa decision taken in November following the collapse of FTX. Since then, users of Gemini Earn were unable to access their funds. The crypto exchange had nearly 340,000 users participating in its program earn. The approximate amount blocked in Genesis currently stands at $900 million.
In addition, the group came up against the intervention of the Securities and Exchanges Commission (DRY) the United States. The regulator has brought charges against both platforms for selling unregistered titles. That stock occurred despite the efforts of Gemini to work with the regulator on its Earn program. A recent report indicates that Genesis creditors, including Gemini, “negotiate a pre-packaged bankruptcy plan”. Under this, Gemini and other creditors would receive cash and equity in DCG for granting a forbearance period of up to two years.
This plan would include a moratorium, lasting one or two years, which would suspend most of the payments due by the company. Nevertheless, creditors will receive in return cash payments and especially shares in Genesis parent company, Digital Currency Group. This moratorium is rather logical since at the beginning of the year, Genesis explained that it was working on a solution, but that the latter required a period of time to be implemented.
Genesis owes billions to creditors
Genesis and its owner, the SoftBank-backed crypto conglomerate, Digital Currency Group, have been in negotiations with creditors since mid-November. Genesis owes its creditors more than $3 billion : 900 million dollars to customers of Gemini, the crypto exchange of Cameron and Tyler Winklevossand $300 million to the Dutch exchange Bitvavo. In order to remunerate them, its parent company, DCGwas considering selling some of its assets to raise capital. The platform was exploring the sale of some of its investments, which amount to around $500 million. DCG had invested in almost 200 projects of cryptographywhich include banks, stock exchanges and depositories.
Many of the reported liquidity issues may stem from the collapse of the crypto venture capital firm Three Arrows Capital in 2022. Silbert told shareholders in January that 3AC owed Genesis $447.5 million and $4,550 bitcoins, worth around $78 million at the time. However, Genesis also held about $175 million on FTX before its November bankruptcy, likely contributing to the company’s cash crunch and potential insolvency. Genesis suspended withdrawals following the bankruptcy filing of FTX. If Genesis were to fail as well, it would be the latest in a series of collapses including Terraform Labs, Voyager Digital, Celsius Network, Three Arrows Capital, FTX and BlockFi.
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