Crypto lender Genesis Trading files for bankruptcy protection

Crypto lender Genesis filed for Chapter 11 bankruptcy protection late Thursday night in Manhattan federal court, the latest victim in the industry contagion caused by the collapse of FTX and a crippling blow to the business once at the heart of Barry Silbert’s Digital Currency Group.

The company listed more than 100,000 creditors in the “mega” bankruptcy filing, with aggregate liabilities ranging from $1.2 billion to $11 billion dollars, according to bankruptcy documents.

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Three separate petitions were filed on behalf of Genesis’ parent company. In a statement, the company noted that the company is only involved in the Genesis crypto credit business. The company’s derivatives business and spot trading will continue without a hitch, as will Genesis Global Trading.

“We look forward to advancing our dialogue with DCG and our creditor advisors as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future,” interim CEO Genesis Derar Islim said. statement.

The filing follows months of speculation that Genesis would enter bankruptcy protection, and comes just days after the Securities and Exchange Commission filed charges against Genesis and its sole partner, Gemini, over the unregistered offering and sale of securities.

Genesis listed a $765.9 million loan it owed from Gemini in Thursday’s bankruptcy filing. Other sizable claims include a $78 million loan owed from Donut, a high-profile decentralized platform, and the VanEck fund, with $53.1 million in debt.

Gemini founder Cameron Winklevoss initially responded to the news on Twitter, writing that Silbert and DCG “continue to refuse to give creditor justice.”

“We are prepared to take direct legal action against Barry, DCG, and others,” he said.

“The sun is the best disinfectant,” says Winklevoss.

Genesis is in negotiations with creditors represented by law firms Kirkland & Ellis and Proskauer Rose, sources familiar with the matter told CNBC. The crash puts Genesis alongside other fallen crypto exchanges including BlockFi, FTX, Celsius, and Voyager.

The collapse of FTX in November froze the market and drove customers across the crypto landscape in search of withdrawals. The Wall Street Journal reported that, after the FTX meltdown, Genesis had requested an emergency bailout of $1 billion, but found no interested parties. DCG’s parent company, which has more than $3 billion in debt, suspended its dividend this week, CoinDesk reported.

Genesis provides loans to crypto hedge funds and over-the-counter companies, but a series of bad bets were made last year very damaged creditors and forced to stop withdrawals on November 16.

The New York-based company has extended crypto loans to Three Arrows Capital (3AC) and Alameda Research, a hedge fund started by Sam Bankman-Fried and linked to the FTX exchange.

3AC filed for bankruptcy in July amid the “crypto season.” Genesis has loaned more than $2.3 billion in assets to 3AC, according to court filings. Creditors of 3AC have been fighting in court to recover even a sliver of the billion dollars that the hedge fund once controlled.

Meanwhile, Alameda became an integral part of FTX’s death. Bankman-Fried has repeatedly denied knowledge of fraudulent activity on the company’s web, but remains unable to provide a reasonable explanation for the multibillion-dollar hole. He was arrested in December, and was released on $250 million bail ahead of his trial, which is set to begin in October.

Genesis has a $2.5 billion exposure to Alameda, though the position was closed out in August. Following FTX’s bankruptcy in November, Genesis said approximately $175 million in Genesis assets were “locked up” in the FTX platform.

Genesis’ financial spiral has exposed DCG Silbert’s wider empire. The parent company was forced to take on Genesis’ $1 billion liability due to the collapse of 3AC. In a subsequent letter to investors, Silbert announced an additional $575 million loan from Genesis to DCG for undisclosed investment purposes.

DCG pioneered general trading reliableallowing investors to hold bitcoins and other currencies in their portfolios without direct exposure. Grayscale Bitcoin Trust discount for net asset value widened significantly last year as confidence in the conglomerate decreased.

This is a developing story. Please check back for updates.