The bankruptcy filings of Genesis, a cryptocurrency lender, have been filed in the United States. This is the latest victim in the shakeout of the digital asset market following the collapse of FTX.
Genesis Global Capital, one the three Genesis entities, applied for bankruptcy protection Thursday. Customer withdrawals were frozen on 16 November, just days after FTX filed its Chapter 11 filing.
According to the lender, it has assets and liabilities of between $1bn and $10bn. It also estimated that it had more than 100,000 creditors when it filed with the US bankruptcy court in the southern district. Genesis Global Holdco, which is the parent company of Genesis Global Capital, filed for bankruptcy protection along with Genesis Asia Pacific, a lending unit.
Genesis Global Holdco stated that there were options available, including a sale. It also said it had $150 million in cash to help with the restructuring. A Chapter 11 process allows a company in trouble to temporarily be protected from creditors while it tries to restructure its finances.
The holding company stated that Genesis’s spot trading, derivatives, broker dealer, and custody businesses were not affected by the bankruptcy proceedings and would continue client trading operations.
This bankruptcy filing is just the latest in a string of crypto failures that have triggered job cuts and high unemployment last year.
According to Genesis’ website, Genesis made $130.6bn worth of crypto loans last year and traded $116.5bn assets. According to Reuters, Three Arrows Capital, a Singapore-based cryptocurrency hedge fund, was the largest borrower. Alameda Research is a trading company closely associated with FTX. Alameda, Three Arrows Capital and FTX are currently in bankruptcy proceedings.
Three Arrows’ Genesis debt was taken over by Digital Currency Group (DCG), its parent venture capital firm. Three Arrows then filed a claim against DCG. DCG’s portfolio includes Grayscale, a crypto asset manager, and CoinDesk, a news service.
The boom in crypto lenders, also known as de facto bankers, was due to the popularity of these cryptocurrency lenders. They are not required to have capital cushions, unlike traditional banks. A lack of collateral caused some lenders and their customers to suffer large losses this year.
The price of bitcoin, the most important crypto asset, is now trading at above $20,000, after hovering around $17,000 for a while after one of its competitors crashed. Bitcoin’s price rose nearly 1% to $20,946 Friday morning.
Professor of Finance at the University of Sussex Carol Alexander said that the Chapter 11 move of Genesis was priced in by crypto markets.
“The insolvency of Genesis has been discounted by the industry. It will not stop the bitcoin bull market. Recent events in crypto markets have scared ordinary investors. They will reinvest in crypto once they see the trend returning, and they will also pay fees to crypto institutions.