DCG’s crypto-lending subsidiary Genesis files for Chapter 11 bankruptcy • MastStatus

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Genesis Global Trading, a subsidiary of crypto conglomerate Digital Currency Group (DCG), filed for Chapter 11 bankruptcy in the Southern District of New York (SDNY) court late Thursday evening.

Genesis Global Holdco and two of its lending subsidiaries Genesis Global Capital and Genesis Asia Pacific have filed voluntary petitions under the bankruptcy code for SDNY, the press release said. “The other Genesis subsidiaries involved in the derivatives and spot trading and custody business and Genesis Global Trading are not included in the filing and are continuing client trading activities,” it added.

Genesis stated that it has more than $150 million in cash, which it intends to use as liquidity to support its ongoing operations and facilitate its restructuring process.

As part of the filing, Genesis plans to consider a “two-track process” for any sale, capital raise or stock transaction that may allow the company to “emerge under new ownership,” the release said.

The filing followed a series of attempts by Genesis to stay afloat.

The company struggled to raise capital for its lending unit, laid off 30% of its staff in early January, and took a financial hit last year from major catastrophic crypto events, such as the collapse of crypto hedge fund Three Arrows Capital and the downturn of cryptocurrencies. exchange ftx.

Genesis had a trade and credit relationship with both Three Arrows Capital and Alameda, FTX’s sister company, DCG CEO Barry Silbert shared in a Jan. 10 letter.

“While we have made significant progress in refining our business plans to address liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, restructuring within the court the most effective way 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 loans, and later that month warned of a possible bankruptcy filing as creditors looked for alternative options to avoid it. Around that time, a Genesis spokesperson told MastStatus, “We have no plans to file for bankruptcy anytime soon.” The spokesperson added: “Our goal is to resolve the current situation consensually without the need for a bankruptcy filing. Genesis continues to engage in constructive discussions with creditors.”

Aside from Genesis, DCG is the parent company of 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 separate operating subsidiary” of DCG.

On Jan. 12, the U.S. Securities and Exchange Commission charged Genesis and cryptocurrency exchange, wallet, and custodian Gemini for the unregistered offering and sale of securities to retail investors through the Gemini Earn crypto asset lending program. The prosecutors said Genesis and Gemini raised billions of dollars in 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, as Genesis lacked sufficient liquidity to meet withdrawal requests following volatility in the crypto asset market” , according to the SEC release. “At the time, Genesis had about $900 million in investor assets from 340,000 Gemini Earn investors. Gemini ended the Gemini Earn program earlier this month. As of today, Gemini Earn’s 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.

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