Crypto Lender Genesis Files for Bankruptcy Following SEC Lawsuit – In a voluntary Chapter 11 bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of New York, Genesis Global Holdco LLC, a prime brokerage division of venture capital company Digital Currency Group (DCG), made its decision on Friday. The company’s two lending business subsidiaries, Genesis Global Capital LLC and Genesis Asia Pacific Pte. Ltd., are part of the bankruptcy filing.
While “other subsidiaries involved in the derivatives and spot trading and custody businesses and Genesis Global Trading are not included in the filing and continue client trading operations,” the announcement clarifies. “As part of its Chapter 11 filing, Genesis has proposed a roadmap to an exit including a Chapter 11 plan,” the company detailed, adding: “The plan contemplates a dual track process in pursuit of a sale, capital raise and/or equitization transaction that would enable the business to emerge under new ownership.”
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Derar Islim, Genesis’ interim CEO, explained that prior to the bankruptcy filing, the company has been trying to “remedy liquidity issues,” including those caused by the default of crypto hedge fund Three Arrows Capital (3AC) and the collapse of crypto exchange FTX. Islim was appointed to his position last August. Genesis claims to have more than $150 million in cash on hand that “will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process.”
The company has filed motions with the bankruptcy court “to enable day-to-day operations to continue in the normal course.” The announcement adds: “Redemptions and new loan originations in the lending business remain suspended, and claims will be addressed through the Chapter 11 process.” With a court-supervised restructuring process, Genesis explained that it plans to advance discussions with its creditors and parent company DCG in the hope of reaching “a holistic solution for its lending business, which, if achieved, would provide an optimal outcome for Genesis clients and Gemini Earn users.”
Gemini co-founder Cameron Winklevoss stated on Twitter Friday that Genesis’ bankruptcy filing “is a crucial step” towards Earn customers being able to recover their assets. However, he noted, “Crucially, the decision to put Genesis into bankruptcy does not insulate Barry Silbert, DCG, and any other wrongdoers from accountability” Last week, the U.S. Securities and Exchange Commission (SEC) charged both Gemini and Genesis Global Capital “for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.”
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