Genesis, a subsidiary of the Digital Currency Group (DCG), is declaring bankruptcy under Chapter 11. The U.S. Securities and Exchange Commission filed the complaint after launching a lawsuit (SEC). To maintain its continued business activities and facilitate the restructuring process, Crypto Lender Genesis claims to have “ample liquidity.”
Genesis’ Bankruptcy Filing
A prime brokerage division of venture capital company Digital Currency Group (DCG), Genesis Global Holdco LLC, disclosed on Friday that it has voluntarily filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York.
The company’s two lending-related companies, Genesis Global Capital LLC and Genesis Asia Pacific Pte. Ltd., are included in the bankruptcy filing, but “other subsidiaries participating in the derivatives and spot trading and custody businesses and Genesis Global Trading are not included in the petition and continue client trading operations,” according to the release.
“As part of its Chapter 11 filing, Genesis has proposed a roadmap to an exit including a Chapter 11 plan,” the company detailed, adding:
The plan contemplates a dual track process in pursuit of a sale, capital raise and/or equitization transaction that would enable the business to emerge under new ownership.
The company was working to “remedy liquidity concerns,” such as those brought on by the failure of cryptocurrency hedge fund Three Arrows Capital (3AC) and the demise of cryptocurrency exchange FTX, according to Derar Islim, interim CEO of Genesis. This effort was made prior to the bankruptcy filing. Islim was appointed to his role in August of last year.
With more than $150 million in cash, Crypto Lender Genesis says it has “ample liquidity to maintain its ongoing business activities and aid the restructuring process.” To “allow day-to-day activities to continue in the usual course,” the company has filed papers with the bankruptcy court. The statement continues:
Redemptions and new loan originations in the lending business remain suspended, and claims will be addressed through the Chapter 11 process.
Repaying Gemini Earn Investors
Genesis stated that through a court-supervised restructuring procedure, it intends to pursue conversations with its creditors and parent company DCG in the hopes of finding “a holistic solution for its lending business, which, if achieved, would give an ideal outcome for Genesis clients and Gemini Earn users.”
Gemini’s Earn cryptocurrency lending scheme has been the source of conflict between Genesis and the cryptocurrency exchange. Crypto Lender Genesis stopped withdrawals in November of last year despite keeping more than 340,000 Gemini Earn investors’ money, totaling almost $900 million.
Cameron Winklevoss, co-founder of Gemini, wrote on Twitter on Friday that Genesis’ bankruptcy filing “is an important step” in helping Earn customers get their assets back. He elaborated, saying: “Crucially, the decision to declare Genesis bankrupt does not shield Barry [Silbert], DCG, and any other wrongdoers from accountability.”
We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.
We will file a lawsuit against Barry and DCG if they don’t get their act together and offer creditors a fair deal. We also think Genesis, DCG, and Barry owe them an explanation in addition to paying back all of the money owed to creditors. The co-founder of Gemini determined that bankruptcy court offers a crucial arena for that to occur.
Federal charges were filed against Gemini and Genesis Global Capital by the U.S. Securities and Exchange Commission (SEC) last week “for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset loan program.”
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