Genesis Files for Chapter 11 Bankruptcy
Luisa Crawford Jan 20, 2023 23:06
Genesis has estimated assets and liabilities of $1 billion to $10 billion. The company is considering a "dual track procedure" to sell, raise funds, or equitize. After FTX and other crypto-exchanges collapsed, the business halted withdrawals in November 2022. Genesis' parent firm DCG may sell part of its $500 million venture capital portfolio to cover its obligations.
Genesis, a cryptocurrency lending company, has filed a petition for bankruptcy protection under Chapter 11 in the Southern District of New York.
According to the filing from January 19th, the company is projected to have liabilities in the range of $1 billion to $10 billion, and its assets fall within the same range.
According to earlier reports, the firm was reportedly contemplating applying for bankruptcy protection in the event that it was unable to obtain sufficient money to address the liquidity issue it was facing.
Genesis said in a news statement dated January 19 that it has been in conversations with its advisers "to its creditors and corporate parent Digital Currency Group (DCG) to analyse the most effective approach to preserve assets and take the company forward to determine the best way to proceed." " Genesis has already begun the process of reorganisation, which will be overseen by the court, in order to further forward these conversations.
According to the Chapter 11 plan that the firm has developed, it is now considering a "dual track procedure" that would include seeking a "sale, capital raising, and/or an equitization transaction." This would ostensibly make it possible for the company "to emerge under new ownership."
According to the company, Genesis's activities in the areas of derivatives, spot trading, broker-dealer services, and custody will not be affected by the Chapter 11 proceedings and will continue to function normally.
In addition to this, it said that it has a cash reserve of more than $150 million, which it thinks "would provide adequate liquidity to fund its continued business activities and simplify the process of restructuring."
Genesis has stated that the goal of the restructuring process is to provide "an optimal outcome for Genesis clients and Gemini Earn users." The process will be led by a "independent special committee" of the board of directors of the company, and this committee will be responsible for overseeing the entire restructuring process.
In November 2022, in response to the disruption in the market created by the failure of FTX, the company temporarily halted all withdrawals from its platform.
Customers of the yield-bearing product Gemini Earn, which is available to users of the cryptocurrency exchange controlled by Genesis, were disrupted as a result of the shift.
Cameron Winklevoss, the co-founder of Gemini, tweeted that the bankruptcy is a "crucial step" toward Gemini users being able to recover their assets. However, Cameron Winklevoss claimed that DCG and its CEO Barry Silbert "continue to refuse to offer creditors a fair deal." Cameron Winklevoss threatened to file a lawsuit "unless Barry and DCG come to their senses."
6 If Barry and DCG don't come to their senses and make a reasonable offer to the creditors, we are going to have no choice but to file a lawsuit against them as soon as possible.
— Cameron Winklevoss, also known as @cameron on Twitter The 20th of January, 2023 Both Genesis and Gemini are being investigated by the Securities and Exchange Commission (SEC) of the United States for allegedly selling unregistered securities via the Earn programme. The SEC is investigating both companies.
Concerns are growing inside DCG, the parent company of Genesis, since it is possible that the business may have to liquidate a portion of its venture capital portfolio worth $500 million in order to make up for Genesis' obligations.
In an effort to "reduce operational expenditures and preserve cash," DCG ceased paying dividends on January 17, 2019.
Reportedly being considered is the sale of DCG's cryptocurrency media site CoinDesk, which could bring in an additional $200 million for the company.
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