Genesis Bankruptcy: Crypto Meltdown Continues

Genesis Global Capital Inc. has joined the ranks of the FTX contagion victims. The crypto lender has filed for chapter 11 bankruptcy protection in the Manhattan federal court.

It has been struggling since the collapse of FTX in November 2022.

Genesis bankruptcy is a major setback for its parent company, Digital Currency Group (DCG). Barry Silbert’s DCG relied on the business of this crypto lender, and now it is likely to face a liquidity crisis.

According to the insolvency filing, the firm has more than 100,000 creditors. In addition, it has accumulated liabilities of $1 billion-$11 billion. It also includes the liabilities of the clients of the Gemini Earn program.

Genesis bankruptcy - Official statement

The firm announced the bankruptcy through a press release on 19 January. It mentioned that the Chapter 11 filing would only be effective on its crypto lending business. However, its spot trading, derivatives, and brokerage businesses will carry on their operations.

In the official statement, the company announced that it has started "a court-supervised restructuring plan", which will allow it to find "a holistic solution".

The bankrupt lending business claims more than $150 million in liquidity. It plans to use this fund to back up its business operations and to use it for restructuring plans.

Crypto crisis after the FTX collapse

Since the collapse of the Sam Bankman-Fried exchange, the industry has been going through a meltdown. FTX contagion spread to several firms, including BlockFi, 3AC, Gemini, Salt, and others.

Earlier, Genesis paused withdrawals from its customers' accounts. It affected the operations of the lending program of Gemini and Genesis. These firms are now facing a lawsuit from the Securities and Exchange Commission. Following this situation, it also laid off 30% of its workforce.

And now, it has filed for protection from bankruptcy. This could also affect DCG's businesses, as it may cause a further liquidity crisis.