Genesis Global Capital is reportedly laying the groundwork for possible bankruptcy after several failed talks with creditors.
The crypto lending arm of Genesis Trading may file for voluntary bankruptcy as multiple negotiations between itself, its parent company Digital Currency Group and Genesis’ creditors reach an impasse.
Origin plans may change after continued consultation
The lender has reportedly failed to ramp up liquidity to meet existing creditor requirements. People familiar with the matter told Bloomberg that the company’s intentions could change pending the outcome of ongoing discussions. DCG declined to comment, while Origin did not respond to requests for comment.
Most notable among the lender’s creditors are the customers of Gemini Earn, an interest-bearing account offered by the Gemini Exchange. Genesis generates income for 34,000 customers by lending $900 million in crypto deposits to other institutions. Gemini takes a deduction of up to 4% on any interest earned.
Genesis Global Trading was hit by the collapse of Singapore hedge fund Three Arrows Capital, which owed the lender $2.4 billion. Despite liquidating Three Arrows positions, Genesis halted withdrawals and loan originations in mid-November 2022 due to cash crunch.
Genesis also held additional funds on Bahamian exchange FTX, which filed for bankruptcy at the same time, making the funds inaccessible.
Last week, DCG suspended dividend payments to maximize its current liquidity. It is reportedly selling assets to generate cash flow.
The tussle between Gemini and DCG continues
Genesis is locked in a very public battle with Gemini co-founders Cameron and Tyler Winklevoss after the lender halted customer withdrawals through November 16, 2022, citing liquidity issues.
On January 2, 2022, Cameron Winklevoss wrote an open letter to DCG CEO Barry Silbert, accusing Arn of feathering his own nest at the expense of customers.
About a week later, the Winklevoss wrote another open letter, this time to the DCG’s board. In the letter, the Gemini co-founder alleged that DCG misled the public into thinking that it had injected the liquidity needed into originations to help the lender pay its creditors.
According to Silbert, DCG assumed $1.2 billion owed to Origin from Three Arrows Fallout via a promissory note. However, Winklevoss pointed out that the promissory note does little to help the lender create the short-term liquidity needed to satisfy creditors.
The SEC recently accused Genesis and Gemini of offering their accrual accounts as unregistered securities, compounding woes for both companies.
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BeInCrypto has reached out to the company or individual involved in the story for an official statement regarding the recent developments, but has not yet received a response.