Weakened by FTX’s fall, the cryptocurrency lending platform filed for bankruptcy on Thursday. More than 100,000 creditors are concerned.
It was expected but not yet confirmed. Cryptocurrency lending platform Genesis has filed for bankruptcy Thursday, seeking protection under Chapter 11 of the U.S. Bankruptcy Code in federal court in Manhattan. In its bankruptcy filing, the company says it has more than 100,000 creditors and debts of between $1 billion and $10 billion, along with its assets.
“While we have made significant progress in refining our business plans to address liquidity issues caused by the recent extraordinary challenges in our industry, including defaults on Three arrows capital and FTX’s bankruptcy, restructuring in the courts is the most effective way to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Derar Islim, interim CEO of Genesis since August. .
According to the document, the company owes more than $3.5 billion to its 50 largest creditors, the Gemini exchange, with which Genesis has been openly in conflict for several weeks, is its largest creditor with more than $765 million in debt listed. All of its creditors were partners in Genesis’ lending business, which has been badly shaken by the upheavals of 2022, from the fall of the Terra Luna ecosystem to FTX’s. However, the company explains that it has more than $150 million in cash, which will enable it to have “sufficient liquidity to support its ongoing business operations and facilitate the restructuring process”.
If the rate of the queen of cryptocurrencies has not been greatly disturbed and is still trading above 20,000 dollars this Friday morning, the consequences could be felt a little later. For the specialized media CoinDeskThis bankruptcy could have wider implications for bitcoin due to the connections between Genesis and digital asset manager Grayscale, which share the same parent company Digital Currency Group (DGC).
“Grayscale manages the Grayscale Bitcoin Trust (GBTC), which has assets under management in excess of $10 billion and traded at a record discount to net asset value late last year, although this discount has recently been reduced”, explains CoinDesk.
In this context, the market fears that the consequences of Genesis’ bankruptcy will somehow lead to the liquidation of the more than 600,000 bitcoins that GBTC owns.
As a reminder, the situation has been worsening for months now for Genesis, initially weakened bycollapse of the Terra Luna ecosystem. After laying off 20% of its workforce in August, Genesis shed 30% of its workforce in early January, down to just 145 employees. The real blow came from the bankruptcy last November of FTX, a player that was strategic to Genesis as the company blocked $175 million from the American giant.
Due to a lack of liquidity, Genesis notified its customers on November 16 that they could no longer withdraw their cryptocurrencies from the platform. What was supposed to be “temporary” never returned to normal, internally weakening Genesis and some of its partners and creditors. With no solution found so far, Genesis had this week established a “pre-arranged bankruptcy plan” with its main creditors.