Crypto firm Genesis to become latest bankruptcy as industry continues to collapse
01/22/2023 / By JD Heyes
Another week, another major cryptocurrency firm is set to file for bankruptcy protection.
As reported by Bloomberg News, Genesis Global Capital “is laying the groundwork for a bankruptcy filing as soon as this week, according to people with knowledge of the situation.”
“The cryptocurrency lending unit of Digital Currency Group has been in confidential negotiations with various creditor groups amid a liquidity crunch. It has warned that it may need to file for bankruptcy if it fails to raise cash,” the report continued.
The report noted further that no one from Genesis Global Capital responded to requests for comment, and a representative for DCG also declined to comment. The report added that talks are still taking place, and that means, ultimately, plans could change. But if things go as they have for other crypto firms, it looks like Genesis is destined for the ash heap of history too.
Bloomberg News noted that financial pressure at DCG, which was founded and managed by Barry Silbert, began in earnest after hedge fund Three Arrows Capital collapsed last year. In November, Genesis stopped withdrawals “soon after crypto exchange FTX — where Genesis held some of its funds — filed for bankruptcy.” All of these failures have caused a ripple effect throughout the crypto industry, including on exchange Gemini Trust, which is run by Cameron and Tyler Winklevoss. “Gemini Earn — a service that let Gemini’s users get yield for lending out their coins through Genesis — stopped redemptions as well,” Bloomberg reported, adding:
Creditors, Genesis and DCG exchanged several proposals, but have so far failed to come to an agreement, the people said. Kirkland & Ellis and Proskauer Rose have been advising groups of creditors. The company is working toward a restructuring plan and had swapped proposals with its creditors, some of whom had suggested receiving a mix of cash and equity from DCG, according to people familiar with the talks.
DCG shareholders were informed in a Jan. 17 letter that the company is suspending quarterly dividends in order to keep from hemorrhaging cash, Bloomberg News noted. Coindesk, an industry news site and a DCG property, confirmed to the outlet earlier this week that it had “engaged Lazard as a financial adviser to explore options” to include “a partial or full sale” of all assets.
Last month, FTX crypto-exchange fraudster Sam Bankman-Fried faced some justice after allegedly committing one of the grossest acts of fraud in modern history.
He was charged with eight counts of criminal actions by the Securities and Exchange Commission that included conspiracy and wire fraud after allegedly misappropriating billions of dollars in customer funds before the collapse of his $30 billion crypto empire.
The government’s indictment, which was unsealed Tuesday morning, charges SBF with conspiring “to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research.” The charges include conspiring to commit wire fraud on customer and lenders, wire fraud on customers and lenders, conspiracy to commit commodities fraud, securities fraud, and money laundering, according to Zero Hedge.
In part, the indictment read: “[SBF] willfully and knowingly did combine, conspire, confederate, and agree together and with each other to commit offenses against the United States by engaging in violations of federal law involving the making, receiving, and reporting of a contribution, donation, or expenditure, in violation of Title 52, United States Code, Sections 30109(d) (1) (A) & (0). [SBF] did defraud the United States, and an agency thereof, by impairing, obstructing, and defeating the lawful functions of a department and agency of the United States through deceitful and dishonest means, to wit, the Federal Election Commission’s function to administer federal law concerning source and amount restrictions in federal elections…”
His company filed for bankruptcy in November.
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Tagged Under:
abiogenesis, bankruptcy, Barry Silbert, CoinDesk, Collapse, crypto, crypto exchange, cryptocurrency, DCG, Digital Currency Group, FTX, risk, Three Arrows Capital, wire fraud
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