Genesis, part of Digital Currency Group, files for bankruptcy

Genesis Global Capital, the crypto-lending platform within the Digital Currency Group (DCG), filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

The petitions were filed by Genesis Global Holdco and its subsidiaries Genesis Asia Pacific and Genesis Global Capital.

The filing shows more than 100,000 creditors, with assets and liabilities ranging from $1 billion to $10 billion. The subsidiaries’ figures vary between $100 million and $500 million.

Top management expects that the restructuring will yield funds for unsecured creditors.

Other Genesis entities involved in derivatives, spot trading, and custody, as well as Genesis Global Trading, were not included in the filing and continue client trading operations.

Genesis Global Capital has not recovered from the fallout of the hedge fund Three Arrows Capital default in June and the FTX collapse in November 2022. If in the first case the parent DCG provided support totaling $1.1 billion, the second—attempts to raise external financing—proved unsuccessful.

In early 2023, the platform cut 30% of its staff.

As of November, platform management did not rule out bankruptcy as one of the scenarios proposed by the hired investment bank Moelis & Company.

At the end of 2022 creditors sought to avoid a chaotic and costly bankruptcy process. The day before, it emerged that the firm would proceed with this step.

According to media reports, Genesis’ debt total reached $3 billion. This amount includes claims by Gemini clients of $900 million.

The documents indicate Genesis owes the Winklevoss brothers’ exchange $765 million. Other major creditors include Mirana (BitDAO and Bybit), Moonalpha (Babel Finance), Coincident Cap, Decentraland, VanEck, Abra, Cumberland and the Stellar Foundation.

Creditors:
• Gemini: $765.9M
• Mirana ( BitDAOand Bybit): $151.5M
• Moonalpha (Babel Finance): $150M
• Coincident Cap: $112M
• Decentraland: $55m
• VanEck: $53m
• Abra: $30m
• Cumberland: $18.7m
• Stellar Foundation: $13.2m pic.twitter.com/DM1Y7NJDmL

— PeckShieldAlert (@PeckShieldAlert) January 20, 2023

The amount owed to Decentraland exceeds the project’s treasury assets.

“Bankruptcy is a decisive step on the path to us being able to recover the assets,” said Gemini co-founder Cameron Winklevoss.

1/ Earn Update: This evening, Genesis Global Capital, LLC (Genesis) filed for bankruptcy under Chapter 11. This is a crucial step towards us being able to recover your assets.

— Cameron Winklevoss (@cameron) January 20, 2023

Winklevoss cited DCG and founder Barry Silbert’s refusal to offer a “fair deal.” He threatened to sue the holding company and its CEO if it does not comply. The executive noted that the Chapter 11 filing would allow “uncovering the machinations” for which Digital Currency Group and Silbert “are responsible.”

4/ Crucially, the decision to put Genesis into bankruptcy does not insulate Barry, DCG, and any other wrongdoers from accountability.

— Cameron Winklevoss (@cameron) January 20, 2023

Winklevoss pledged to use every tool at hand in the bankruptcy court to maximise recovery for Earn users.

7/ Meanwhile, we will use every tool available to us in the bankruptcy court to maximize recovery for Earn users and any other parties within the bankruptcy court’s jurisdiction.

— Cameron Winklevoss (@cameron) January 20, 2023

Earlier, Bernstein, as options to address Genesis’ problems, proposed raising capital, selling non-core assets, and preserving the holding’s digital-asset manager Grayscale or liquidating GBTC.

DCG is considering selling its subsidiary CoinDesk.

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