Crypto Lender Genesis, Shot Down By Bank Run, Eyes Quick Bankruptcy

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Crypto lender Genesis Global Holdco LLC is aiming for a relatively quick exit from bankruptcy court after collapsing under the force of a prolonged digital asset sell-off.

The company, backed by Barry Silberts Digital Currency Group, filed for Chapter 11 bankruptcy in New York on Thursday evening. It entered court protection with a restructuring plan already drawn up, hoping to implement it no later than May 19, according to bankruptcy filings.

Genesis will attempt to sell itself and distribute the proceeds to creditors, according to a statement. If a sale is not viable, creditors would receive shares of the restructured company. This plan is not final and requires the approval of a federal judge, as well as input from any injured creditors along the way. These include Gemini Trust Co., the crypto firm run by Tyler and Cameron Winklevoss, which pushed Silbert to recover $900 million of client funds that have been trapped since Genesis ran into trouble in November. .

If successful, the four-month restructuring would represent a much faster process than what has been seen for other collapsed crypto lenders like Voyager Digital Ltd. and Celsius Network LLC. Genesis is seeking offers for all of its assets by April 14, according to court documents.

Creditors could also end up collecting money from the DCG. Genesis has hired a former federal prosecutor to investigate an $850 million loan the company made to DCG entities, Genesis board member Paul Aronzon said in a court filing. As part of the company’s proposed reorganization, any money raised from lawsuits brought by Genesis would help repay creditors, Aronzon said.

WATCH: Cryptocurrency lender Genesis Global Capital has filed for Chapter 11 bankruptcy, becoming the latest company to collapse following the rapid fall of FTX.

Source: Bloomberg

DCG has come under financial pressure following the sudden collapse of hedge fund Three Arrows Capitals last year. Months later, FTX where Genesis held some of its funds began to implode, and Genesis fell prey to a flurry of loan buyout requests.

As the FTX entities began to experience their meltdown, the company received calls on its loans amounting to approximately $827 million, Derar Islim, Genesis’s acting chief executive, said in court documents. The near-bank run was outsized and severely affected the company’s available cash, he said.

Genesis’ lending unit suspended withdrawals in November, shortly after FTX’s bankruptcy. Redemptions and lending to the Genesis lending operation remain suspended, according to the statement.

The bankruptcy filing does not include Genesis Global Trading and other units involved in its derivatives, spot trading and custody businesses. Chapter 11 units had more than $5 billion in liabilities, including intercompany balances as of Nov. 30, according to court documents.

Genesis will have to negotiate with its creditors as it plans to restructure, including the Winklevosss Gemini Trust. Babel Finance, listed as the third-largest named creditor of Genesis, holds a claim of $150 million.

Silbert is locked in an escalating battle with Geminis Cameron Winklevos, whose clients have lost access to funds placed with Genesis. Winklevoss said in a tweet after the bankruptcy filing that unless Barry and DCG come to their senses and make a fair offer to creditors, we will be taking legal action against Barry and DCG shortly. The threat follows Winklevoss’ accusations earlier this month that Silbert repeatedly misrepresented Genesis’ financial position, and his calls for Silbert’s removal as CEO.

DCG called Winklevoss’ statements a publicity stunt and said the accusations of wrongdoing are baseless. DCG will continue to engage in constructive negotiations with Genesis and its creditors with the goal of reaching a solution that works for all parties, the company said in a statement sent Friday.

The case is Genesis Global Holdco LLC, 23-10063, US Bankruptcy Court, Southern District of New York, Manhattan.

(Updates with additional details starting with the first paragraph.)

To contact the reporters on this story: Jeremy Hill in New York at [email protected]; Steven Church in Wilmington, Delaware at [email protected]

To contact the editors responsible for this story: Claire Boston at [email protected]

Shannon D. Harrington, Beth Williams

2023 Bloomberg LP All rights reserved. Used with permission.

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