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Genesis Heading Towards Bankruptcy, May File Papers This week

According to sources who are aware of the situation, the discussions between Genesis and its creditors have not advanced as quickly as was anticipated and the firm will file for bankruptcy within a week.

Photo by Melinda Gimpel / Unsplash

The beleaguered crypto currency lender Genesis will likely submit its bankruptcy petition this week.

The crypto currency lending company Genesis Global Capital, which is also a part of the Digital Currency Group (DCG), will probably file for bankruptcy. According to sources who are aware of the situation, the discussions between Genesis and its creditors have not advanced as quickly as was anticipated.

Bankruptcy is Imminent for Genesis

Bloomberg reported (1) on Wednesday, January 18, that Genesis may contemplate bankruptcy filing if it cannot obtain capital amid a severe liquidity crunch. Consider that discussions with the lenders are continuing and that the strategies might undergo abrupt shifts at any point.

According to a separate source (2), Genesis and its creditors are discussing the Chapter 11 bankruptcy plan. The media outlet reported, citing anonymous sources, that as an element of the proposed agreement, lenders might consent to a debt relief duration ranging from 1 to 2 years while also obtaining cash and equity from DCG as a component of the deal.

The announcement that the US Securities and Exchange Commission (SEC) has accused crypto currency exchange Gemini and Genesis Group of marketing unregistered securities through the Genesis "Earn" program came less than a week before the report was made public. The SEC made the announcement.

After the crypto currency exchange FTX went bankrupt in November 2022, numerous other crypto currency companies have found themselves in financial difficulty as the contagion spreads.

A severe lack of liquidity was caused by Genesis having around $175 million worth of FTX assets in its possession right before the exchange failed. Within a month of FTX's bankruptcy, Genesis began experiencing significant problems with its liquidity and was finally forced to restrict withdrawals due to these problems.

The Fight Between Gemini and Genesis

Because the crypto currency lending platform Genesis has temporarily banned transfers, over $900 million worth of Gemini's money is being held at the exchange. Cameron Winklevoss, the co-founder of Gemini, has been sending open letters to the Genesis Foundation and the Digital Currency Group, which is Genesis's parent organization.

Cameron Winklevoss also urged that DCG chairman Barry Silbert be removed from his position to facilitate the beginning of fair discussions. Cameron has also accused Silbert of engaging in unethical negotiations and mixing company money while working at the crypto currency corporation.

On the other hand, the DCG has described the accusations made by Winklevoss as "malicious, false, and defamatory assaults." Because of this, crypto currency trading platform Gemini was forced to stop its "Earn Program" as the conflict with Genesis escalated.

If Genesis were to file for bankruptcy under Chapter 11, it would buy the company some breathing room and some time to talk with its creditors about how to save the core economic business.

An investing and financial services company, Houlihan Lokey, has already provided a liquidity reorganization plan for the creditor's group for genesis and DCG. This took place the previous month, in December.