Crypto lender Genesis filed for bankruptcy protection Thursday night in Manhattan federal court. The collapse of FTX caused the latest crypto fall in the industry contagion. And it was a crippling blow to a business at Barry Silbert’s Digital Currency Group.
The company has listed over 100,000 creditors in a bankruptcy filing. This came with aggregate liabilities ranging from dollars 1.2 billion to dollars 11 billion, according to bankruptcy documents.
Three separate petitions were filed for Genesis’s holding companies. However, the company’s derivatives and spot trading business shall continue unhindered, as will Genesis Global Trading.
How Genesis is positioned now
Derar Islim, Genesis interim CEO, said in a statement that they look forward to advancing their dialogue with DCG and their creditors’ advisors. They seek to implement a path to maximize value. They would also like to provide the best opportunity for their business to emerge well-positioned for the future.
Here, the filing follows after months of speculation over whether the company Genesis would enter bankruptcy protection. Also, the filing came just days after the Securities and Exchange Commission filed a suit against the company and its one-time partner, Gemini, over the unregistered offering and the sale of securities.
Genesis listed a dollars 765.9 million loan payable from Gemini in the bankruptcy filing on Thursday. Other claims included a dollars 78 million loans payable from Donut, a high-yield and decentralized platform, and a VanEck fund, with a dollars 53.1 million loan payable.
Presently, Genesis is negotiating with different creditors represented by law firms Proskauer Rose and Kirkland & Ellis, sources familiar with the news told CNBC. The bankruptcy puts Genesis along with other fallen crypto exchanges like BlockFi, Celsius, Voyager, and FTX.
How everything followed step by step
Genesis crypto company provided loans to crypto hedge funds. But, a series of bad bets in the last year damaged the lender and forced the company to halt withdrawals on November 16.
The New York-based firm had also extended crypto loans to Three Arrows Capital or 3AC and Alameda Research, the hedge fund started by Sam Bankman-Fried and was closely linked to his FTX exchange.
3AC, or Three Arrows Capital, filed for bankruptcy in July. Genesis had loaned over dollars 2.3 billion worth of assets to Three Arrows Capital, according to court filings.
Alameda was integral to FTX crypto’s eventual fall. Bankman-Fried repeatedly denied knowledge of any fraudulent activity in his companies. But, he remains unable to provide a proper explanation for everything. He was arrested in December and was also released on a dollar 250 million bonds before his trial, which begin in October.
The financial spiral of Genesis exposed Silbert’s broader DCG empire. The parent company was forced to take over Genesis’s dollar 1 billion liability due to 3AC’s collapse.