As the crypto industry continues to weather the storm of market downturns and regulatory scrutiny, the latest casualty in the space is none other than the crypto lender, Genesis Global Capital. The company has filed for Chapter 11 bankruptcy protection, becoming the latest in a string of companies that have been impacted by the collapse of FTX.
The Precarious State of Genesis Global Capital In a statement reported by BBC, Genesis interim CEO Derar Islim stated, "We look forward to advancing our dialogue with DCG and our creditors' advisers 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." The company's Chapter 11 plan calls for consideration of a “dual process” following a “sale, capital increase, and/or ownership transaction” that would apparently allow the business to continue under new ownership.
Notably, Genesis' derivatives, spot trading, broker-dealer, and custody businesses are not part of the Chapter 11 proceedings and will continue to operate under the corporate name. The company claims to have more than $150 million in cash, which they believe will "provide sufficient liquidity to support their ongoing business operations and facilitate the restructuring process." However, Genesis reportedly owes its creditors more than three billion dollars.
The parent company, DCG, is considering selling part of its venture capital portfolio to save the wholly-owned subsidiary. The portfolio is worth $500 million and consists of more than 200 crypto-related companies.
The Restructuring Process and Its Impact
The restructuring process will be led by an "independent special committee" of the company's board of directors, and Genesis says the goal of the process is to provide "an optimal outcome for Genesis customers and Gemini Earn customers." The company suspended withdrawals from its platform in November 2022 due to market turbulence caused by the collapse of FTX.
The move affected users of Gemini Earn, a product that generates returns for users of the Gemini exchange operated by Genesis. Both Genesis and Gemini are facing charges from the Securities and Exchange Commission (SEC) for allegedly offering unregistered securities through the Earn program.
Fears are growing over Genesis' parent company DCG that it may have to sell some of its $500 million in venture capital to try to cover Genesis' liabilities. On January 17, DCG stopped paying dividends in a move aimed at "reducing operating costs and preserving liquidity." A sale of its crypto media outlet CoinDesk is also reportedly under consideration, which could net DCG $200 million.