Genesis Global Trading, a subsidiary of the crypto conglomerate Digital Currency Group (DCG), filed for Chapter 11 bankruptcy in the Southern District of New York (SDNY) court late Thursday night.
Genesis Global Holdco and two of its lending business subsidiaries, Genesis Global Capital and Genesis Asia Pacific, filed voluntary petitions under the bankruptcy code for SDNY, its press release stated. “Genesis’s 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,” it added.
Genesis stated it has over $150 million in cash, which it plans to use as liquidity to support its ongoing operations and facilitate its restructuring process.
As part of its filing, Genesis plans to consider a “dual track process” for sale, capital raise or equitization transaction that would potentially allow the business to “emerge under new ownership,” the release said.
The filing followed a series of attempts from Genesis to stay afloat.
The firm struggled to raise capital for its lending unit, cut 30% of its staff in early January and took a financial hit from major catastrophic crypto events last year like the collapse of crypto hedge fund Three Arrows Capital and the decline of crypto exchange FTX.
Genesis had a trading and lending relationship with both Three Arrows Capital and Alameda, FTX’s sister company, DCG’s CEO Barry Silbert shared in a letter from January 10.
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” Derar Islim, interim CEO of Genesis, said in a statement on Thursday.
In mid-November 2022, Genesis halted withdrawals and new loan originations and later that month the firm warned of a possible bankruptcy filing as creditors looked for alternative options to prevent it. Around that time, a Genesis spokesperson told TechCrunch, “We have no plans to file bankruptcy imminently.” The spokespersson added, “Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”
Aside from Genesis, DCG is the parent company of digital currency asset manager Grayscale, media company CoinDesk, mining and staking company Foundry, digital asset exchange and wallet Luno and API-centric platform TradeBlock. Silbert said in the mid-January letter that Genesis is a “separate and distinct operating subsidiary” from DCG.
On January 12, the U.S. Securities and Exchange Commission charged Genesis and cryptocurrency exchange, wallet and custodian Gemini for the unregistered offer and sale of securities to retail investors through Gemini Earn crypto asset lending program. The prosecutors said Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors.
“In November 2022, Genesis announced that it would not allow its Gemini Earn investors to withdraw their crypto assets because Genesis lacked sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market,” the SEC release stated. “At the time, Genesis held approximately $900 million in investor assets from 340,000 Gemini Earn investors. Gemini terminated the Gemini Earn program earlier this month. As of today, the Gemini Earn retail investors have still not been able to withdraw their crypto assets.”
This is a developing story and may be updated to reflect new information.