Cryptocurrency Sector Crisis Worsens, Cryptocurrency Firm Genesis’s Lending Unit Files For Bankruptcy
In the Southern District of New York, Genesis, a US-based cryptocurrency lender that was having a hard time keeping up with the mounting financial difficulties brought on by the current crypto winter, filed for bankruptcy on Thursday 19.01.2023. Following the abrupt closure of the FTX cryptocurrency exchange in November and the ensuing worsening of the cryptocurrency market, the company had already announced that withdrawals would be stopped. Due to consecutive project failures and investor withdrawals, the cryptocurrency market lost about $200 billion in value between October 2022 and January 2023.
The Genesis says it has both liabilities and assets ranging between $1 billion to $10 billion. Genesis also claims to have over $150 million in cash on hand.
The company stated in a press release that the decision to file for bankruptcy was well thought through and will be the first stage in the reorganisation process.
Genesis has outlined a plan for a global resolution of all claims through the establishment of a trust that would distribute assets to creditors as part of its Chapter 11 petition. In order to pursue a sale, capital raise, and/or equitization transaction that would allow the business to emerge under new ownership, the plan envisages a dual track procedure, according to the press release.
Genesis’ next course of action will involve starting a marketing and sales campaign to monetize its assets in order to raise finance. According to the firm, the funds obtained would be used to pay creditors.
The article stated that creditors would acquire ownership interests in the reorganised Genesis Global Holdco “if the marketing process does not result in a sale or capital raise.” In the interim, Genesis’ board of directors will monitor the company’s ongoing restructure as an impartial special committee.
Genesis and its parent organisation Digital Currency Group (DCG) owed consumers of the Gemini cryptocurrency exchange $900 million following FTX’s demise due to a liquidity crisis.
Genesis has announced worker layoffs in an effort to save its company from the effects of the market. Genesis was having trouble raising money back in November and had thus advised potential investors that it could need to file for bankruptcy if its attempts were unsuccessful.
