Late night on Thursday the 19th, in a New York federal district court, Genesis Global Holdco LLC, the parent company of distressed crypto lender Genesis Global Capital, filed for Chapter 11 bankruptcy protection.
Genesis Global Holdco, LLC estimated it has between 1 and 49 creditors, between $100 million and $500 million in liabilities, and holds between $100 million and $500 million in assets in a discretionary petition. The filing also records Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd, subsidiaries of Genesis Global Holdco, have also filed for bankruptcy protection.
FTX Tumble Ripple Effect
Genesis, whose trading arm has $175M in funds locked in their FTX account, had been struggling to raise fresh capital enough to reach an amicable agreement to settle its over $3BN debt with creditors. The downfall and insolvency of FTX had also forced the company’s institutional lending unit to suspend redemptions and new originations – a decision initiated by the parent company Digital Currency Group DCG – as it had come under increasing pressure to give an account of the $900M it owes Gemini clients. Genesis revealed on Nov 22, 2022, that it retained investment bank Moelis & Company to bring in fresh liquidity and help in its restructuring process.
Three Arrows Capital Setback
Genesis also incurred losses of hundreds of millions of dollars in August 2022 due to its $2.4BN loan made to failed Singapore crypto hedge fund Three Arrows Capital. Three Arrows Capital filed for bankruptcy in July 2022. The costs of lending this loan also necessitated the company to cut a fifth of its staff and replace its chief executive, Michael Moro. The cascading effect in the turbulent times for crypto companies has caused Genesis to announce a further 30% layoff of its staff. This takes down 145 employees.
Price Market Fears for Genesis Global
This bankruptcy filing could have wider ramifications for bitcoin as Genesis, and digital assets manager Grayscale are owned by Digital Currency Group, DCG. Grayscale operates the most prominent bitcoin investment, GBTC, which holds under management $10.5 billion in assets. In November 2022, GBTC traded at a record 45% discount to the underlying bitcoin price. That discount has narrowed recently. The greatest prayer for many bitcoin and altcoin holders is that the consequences of the Genesis bankruptcy will not lead to the liquidation of GBTC’s holdings of more than 630,000 BTC and 3 million ETH to cover Genesis’ liabilities. This liquidation, which should force a sell-off of its assets, is feared to likely plummet the prices of BTC, Ethereum, Zcash, Lumens, Solana, Litecoin, Bitcoin Cash, Basic Attention Coin, Chain Link, and Ethereum Classic.