Crypto Firm Genesis Files For Bankruptcy Following FTX Collapse• January 20, 2023 2:33 pm • Comments
It looks like the collapse of the crypto exchange FTX is having a domino effect on other major crypto brokerage firms in the industry.
Just recently, Genesis Global Capital, a crypto brokerage, has revealed that they are also looking into filing for bankruptcy.
Many customers have already had such suspicions before the news as the firm has paused all customer withdrawals after the collapse of FTX.
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Although the situation was unclear back then, there is already a lot of evidence that Genesis may soon go down as well as it has been in talks with various creditors and has been desperate to raise more capital.
The effect that this will have on the crypto industry is still unknown, but it is possible that investors may already be expecting more firms like Genesis to declare bankruptcy.
After all, there isn’t much shock value anymore after the collapse of FTX and the market may have already accounted for this.
A billion here, a billion there. Bankrupt Genesis owes its top 50 creditors $3.4 billion, a little bit more than the $3.1 billion owed by FTX to its top 50 creditors. https://t.co/s6jpqvA6cN
— Market Rebellion (@MarketRebels) January 20, 2023
Since the collapse and bankruptcy of crypto exchange FTX in November, Genesis has been scrambling to raise fresh capital or reach a deal with creditors.
The company’s institutional lending unit had been forced to suspend redemptions and new originations as a result of the FTX implosion.
Plus, Digital Currency Group (DCG) its parent company, has come under increasing pressure to make good on $900 million of locked deposits. Genesis late last year retained investment bank Moelis & Co. to assist with exploring options.
Earlier in 2022, Genesis saw its $2.4 billion loan to hedge fund Three Arrows Capital go bust after Three Arrows collapsed because of its exposure to the Terra network, whose token and stablecoin plunged in value.
DCG is also the parent company of CoinDesk.
Upon looking at Genesis’s financial situation, it is also clear that there is a lot of financial connections to other firms that have also been affected by the bearish market of last year.
For example, Genesis apparently had a $2.5 billion exposure to Alameda which was the research fund that was started by Sam Bankman-Fried.
The collapse of FTX means that a lot of Genesis’s assets were also locked and no longer accessible by the company.
The fact that Genesis had such a large amount of exposure to other firms that are considered risky certainly is not a good look for Genesis customers.
Whether or not the customers will be able to get their withdrawals from the brokerage is unknown, but history has shown that it is rare that the full value is returned.
As a result, it is clear that the lesson from all of the events this year in crypto is that self-custody of digital assets is always the safest option.
And there it is – Genesis has filed for Chapter 11 bankruptcy protection.
It has less than $500 million in assets, but its largest creditor alone has a claim of $765 million 😵💫🥴
— Joe Consorti ⚡ (@JoeConsorti) January 20, 2023
Genesis’ financial spiral has exposed Silbert’s broader DCG empire. The parent company was forced to take over Genesis’ $1 billion liability stemming from 3AC’s collapse.
In a later letter to investors, Silbert disclosed an additional $575 million loan from Genesis to DCG for undisclosed investing purposes.
DCG pioneered publicly traded trusts, allowing investors to hold bitcoin and other currencies in their portfolio without direct exposure.
Grayscale Bitcoin Trust’s discount to net asset value widened significantly last year as confidence in the conglomerate waned.
JUST IN: Genesis Global has filed for bankruptcy in the Southern District of New Yorkhttps://t.co/nW5XXbHEWQ
— CoinDesk (@CoinDesk) January 20, 2023
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