Encrypted asset broker Genesis goes bankrupt: debt exceeds $3.5 billion, dragged down by FTX collapse

Recently, the “currency circle” suddenly exploded. The “currency circle” giant with an asset transaction scale of over 110 billion US dollars (about 800 billion yuan) suddenly declared bankruptcy, which once again made the global virtual currency market precarious.

Figure/Figure Worm

The debt exceeds 23 billion! “Currency circle” giant files for bankruptcy

According to the Securities Times, on January 19 local time, the cryptocurrency lender Genesis Global Capital formally filed for bankruptcy protection in the New York Federal District Court. As one of the world’s largest cryptocurrency lenders, Genesis will issue a total of US$130.6 billion (approximately RMB 880 billion) in encrypted loans in 2022.

Genesis said in documents submitted to the court that its assets and liabilities are between US$1 billion and US$10 billion (approximately RMB 6.8 billion to 68 billion).

According to media reports, Genesis currently owes more than $3 billion to creditors, and after it files for bankruptcy protection, creditor claims will be processed through Chapter 11 procedures. Genesis and its advisors said they would continue to evaluate options to advance progress towards a global resolution.

The list of the 50 largest unsecured creditors published in the Genesis bankruptcy filing includes Gemini Trust Company ($765 million), Mirana Ventures entity Mirana Corp ($151 million), PayPal Finance Moonalpha Financial Services Limited ($150 million) , and cryptocurrency hedge fund Coincident Capital entities Coincident Capital International, Ltd. ($112 million), Decentraland ($55 million), VanEck ($53 million), Cumberland ($18 million), Stellar Foundation ($13 million) . According to statistics, the amount owed by Genesis to these 50 largest creditors exceeds US$3.5 billion (approximately RMB 23.7 billion).

It is worth mentioning that Genesis Global Capital is one of the world’s largest cryptocurrency lenders, which represents digital assets for financial institutions such as hedge funds and asset management companies. According to the information provided by Genesis, in 2022, Genesis will issue a total of US$130.6 billion in encrypted loans, and the scale of asset transactions will be as high as US$116.5 billion (about 800 billion yuan).

After Genesis filed for bankruptcy, the fate of the owner behind it, Digital Currency Group (DCG), is also affecting people’s hearts.

Genesis has previously warned that it may need to file for Chapter 11 bankruptcy if it cannot raise cash. Genesis parent company Digital Currency Group (DCG) has written to shareholders that the company is suspending its quarterly dividend to conserve cash.

DCG is the world’s largest crypto venture capital and the parent company of Grayscale and CoinDesk. According to official information, Digital Currency Group was established in 2015 and has successively received support from investors such as SoftBank, Singapore Government Investment Corporation (GIC), and Alphabet’s venture capital arm CapitalG.

FTX “Thunderstorm” became the last straw

The reason why Genesis suddenly filed for bankruptcy is a series of crisis events in the currency circle since 2022. Among them, FTX, one of the world’s largest virtual currency exchanges, “exploded” was the last straw that crushed Genesis.

On November 11 last year, FTX filed for bankruptcy. The funds of over one million customers around the world were embezzled and the account balance could not be withdrawn. Its founder, Sam Bankman-Fried, a post-90s guy known as “Buffett 2.0” ( Sam Bankman-Fried, referred to as “SBF”, hereinafter referred to as Bankman-Fried) became the target of public criticism. The U.S. Securities and Exchange Commission (SEC) has accused Bankman-Fried of embezzling billions of dollars in customer deposits to fund its business and political activities. And U.S. federal prosecutors say he orchestrated one of the largest financial frauds in U.S. history.

At the time, Genesis urgently halted customer withdrawals, citing “unprecedented market volatility” and liquidity issues.

Since then, the company has tried unsuccessfully to find new funding. In the end, he had no choice but to apply for bankruptcy protection to the court on January 19.

According to Blue Whale Finance, in November last year, FTX, the world’s second largest cryptocurrency exchange, went bankrupt, and Genesis broke out in a run, and had frozen all customer accounts on November 16 last year, unable to meet customers’ redemption requests. According to public information, $900 million of customer funds of cryptocurrency exchange Gemini is trapped in Genesis.

Genesis and parent company DCG have been in secret talks with creditors on repayment and asset disposal, but have so far failed to reach a consensus and plans could still change, according to people familiar with the matter. Separately, Genesis is working on a restructuring plan and has negotiated with creditors, some of whom have proposed a combination of cash and equity from DCG. If Genesis is unable to raise cash, it could file for bankruptcy as early as this week. Earlier on January 6, a person familiar with the matter disclosed that Genesis had cut 30% of its employees.

Previously, Genesis suffered huge losses because of its loans to SBF’s trading agency Alameda Research and Three Arrows Capital. Both Alameda and Three Arrows filed for bankruptcy last year. After the liquidation of Three Arrows, Genesis laid off 20% of its employees. CEO also resigned.

Source丨Securities Times, Yangcheng Evening News, Blue Whale Finance, Daily Economic News