Bankruptcy protection is sought by DCG’s subsidary Genesis

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By Degen Lipsa

After suffering losses from two of the greatest sector failures of 2022, Genesis Global Holdco LLC, the parent company of embattled cryptocurrency lender Genesis Global Capital, filed for Chapter 11 bankruptcy protection. The case was filed late Thursday night at the Manhattan Federal court.

Three voluntary petitions were submitted to the bankruptcy court by Genesis Global Holdco, LLC, Genesis Asia Pacific Pte Ltd, and Genesis Global Capital, LLC.The same company that controls CoinDesk, Digital Currency Group, encompasses all three.Genesis has proposed cooperative case administration.

The partner company to Gemini’s now-defunct Earn programme, Genesis Global Capital, projected more than 100,000 creditors and between $1 billion and $10 billion in liabilities as well as assets in its filing.The assets and liabilities of the other two companies were believed to be between $100 million and $500 million, respectively.

These businesses make up Genesis’ cryptocurrency lending division, which was shaken by the collapses of hedge fund Three Arrows Capital and cryptocurrency exchange FTX last year. According to a press release, Genesis’ other companies that are active in the derivatives, spot trading, and custody sectors, as well as Genesis Global Trading, were not included in the filing and still conduct client trading.

Genesis Global Capital stated in its statement that it anticipates there would be money left over after the restructuring process to pay unsecured creditors, a class of creditors who may be completely eliminated in bankruptcy proceedings if the situation is particularly grave.Customers of a yield product offered by the Winklevoss brothers’ cryptocurrency exchange, Gemini, were harmed when Genesis Global Capital was compelled to restrict customer withdrawals shortly after FTX collapsed into its own bankruptcy case in November.

Genesis had been frantically trying to find new funding or work out a solution with its creditors.It was under increasing pressure to repay $900 million in locked deposits, along with parent business Digital Currency Group (DCG).Late last year, Genesis hired Moelis & Co., an investment firm, to help with the options research.

Before FTX handed Genesis a hit, Three Arrows Capital’s failure as a cryptocurrency hedge fund cost the company hundreds of millions of dollars in losses, CoinDesk first revealed last year.

Genesis said earlier this month that it will reduce its workforce from 145 to 145 by 30%. Due to the fact that Genesis and digital asset manager Grayscale are owned by the same parent company in DCG, the bankruptcy filing on Thursday may have wider ramifications for bitcoin.
Grayscale runs the Grayscale Bitcoin Trust (GBTC), which manages assets worth more than $10 billion and was trading at a record discount to net asset value as of late last year, though that discount has lately shrunk.Market participants are concerned that the effects of the Genesis bankruptcy may possibly result in the liquidation of GBTC’s assets of more than 600,000 bitcoin.

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