Crypto broker Genesis files for Chapter 11 bankruptcy

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Cryptocurrency broker Genesis has filed for Chapter 11 bankruptcy, becoming the latest casualty of the fallout from the implosion of Sam Bankman-Fried’s digital asset exchange FTX last year.

Genesis and its owner, SoftBank-backed crypto conglomerate Digital Currency Grouphave been in negotiations with creditors since November.

“An in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Genesis interim chief executive Derar Islim. “We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution.”

Genesis owes creditors more than $3bn, the Financial Times previously reportedincluding $900mn to customers of Gemini, the crypto exchange of Cameron and Tyler Winklevoss, and €280mn to Dutch exchange Bitvavo.

In its Chapter 11 documents, filed with the bankruptcy court for the Southern District of New York, Genesis and an Asia-Pacific subsidiary each listed assets and liabilities in the range of $100mn-$500mn. Genesis Global Capital, another subsidiary, listed an asset and liability range of $1bn-$10bn, as well as more than 100,000 creditors.

Genesis said it had more than $150mn in cash on hand, which would provide liquidity to support its business operations and facilitate the restructuring process.

Moelis & Company is acting as financial adviser to the crypto broker, Cleary Gottlieb Steen & Hamilton is acting as legal counsel and Alvarez & Marsal is serving as restructuring adviser, said Genesis.

Genesis was one of the biggest lenders to FTX, the $32bn crypto exchange that itself filed for bankruptcy in November. Genesis halted customer withdrawals in November following the crash at FTX, whose founder Bankman-Fried has pleaded not guilty to criminal fraud charges.

FTX’s unraveling was the latest high-profile failure to send shockwaves through the digital asset sector. The value of bitcoin, the most popular token in the industry, is down almost 70 per cent from its high of nearly $70,000 in November 2021.

Genesis’s owner Digital Currency Group, which is backed by investors including SoftBank, Singapore’s GIC and Alphabet’s venture arm CapitalG, had been searching for outside funding since tensions with creditors burst open this month.

The group is locked in a dispute with the Winklevoss twins, whose Gemini exchange used Genesis in its crypto asset lending program. Cameron Winklevoss has called for DCG’s board to sack its chief executive Barry Silbertsaying he was “unfit” to run the group.

Following the filing, Winklevoss wrote on Twitter that DCG and Silbert “continue to refuse to offer creditors a fair deal”, but added that the filing was “a crucial step” for Gemini to recover user assets.

“Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” he wrote.

Last week, the US Securities and Exchange Commission Sweden Genesis and Gemini over the lending program, saying it was not properly registered as a securities offering.

Gemini ended the program earlier this month, but retail investors, who loaned their crypto tokens to Genesis in exchange for interest rates as high as 8 per cent, remain unable to make withdrawals, according to the regulator.

Genesis Global Trading and subsidiaries involved in derivatives, spot trading and custody were not involved in the filings, the company said.

Genesis declined to provide further comment. DCG did not immediately respond to a request for comment.

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