Crypto Lender Genesis Global has become the latest firm to call it quits following the collapse of FTX, filing for Chapter 11 bankruptcy protection in New York.
Genesis has filed for Chapter 11 in the Southern District of New York.
The firm’s assets are in the range of $1 billion to $10 billion. Earlier reports claimed the company had been considering filing for bankruptcy protection if it was unable to raise capital to stem its liquidity crisis.
In a Jan. 19 official statement, Genesis said it had been taken part in discussions with its advisors “to its creditors and corporate parent Digital Currency Group (DCG) to evaluate the best path to preserve assets and push the business ahead.”
“Genesis has now commenced a court-supervised restructuring process to additional development these discussions.”
The company’s Chapter 11 plan sees it contemplating a “double track process” chasing after a “deal, capital raise, or potentially an equitization transaction” that would clearly enable the business “to emerge under new ownership.”
The derivatives, spot trading, broker-dealer and custody businesses of Genesis are not part of the Chapter 11 procedures and will continue operations according to the firm.
It claims to have more than $150 million in cash close by that it believes will give it plenty of cash to help its ongoing business operations and facilitate the restructuring process.
The restructuring process will be driven by an “independent special committee” of the company’s governing body, and Genesis says the process is aimed at giving “an ideal outcome for Genesis clients and Gemini Earn users.”
Market turbulence caused by the collapse of FTX led to the suspension of withdrawals from the platform.The move influenced users of Gemini Earn, a yield-bearing product for users of the Gemini cryptocurrency exchange managed by Genesis.
Gemini co-founder Cameron Winklevoss tweeted the bankruptcy is a “crucial stage” toward Gemini users having the option to recover their assets however claimed DCG and its CEO Barry Silbert “continue to refuse to offer creditors a fair deal” and threatened to record a lawsuit “except if Barry and DCG come to their senses.”
Both Genesis and Gemini are facing charges from the US Securities and Exchange Commission (SEC) for allegedly offering unregistered securities through the Earn program.
Fears are mounting over Genesis’ parent company DCG as it might need to sell part of its $500 million funding portfolio to attempt to offset Genesis’ liabilities.
On Jan. 17, DCG halted dividend payments in a move aimed at “reducing operating expenses and saving liquidity.” The sale of its Crypto news source CoinDesk is also reportedly being weighed which could net DCG $200 million.