Digital Currency Group’s (DCG) subsidiary Genesis Global, filed for bankruptcy on January 19, 2023. The crypto lender was struggling in the market after the collapse of FTX.
The crypto lending firm was among the major clients of the bankrupt crypto exchange FTX and had over $175M locked in its FTX trading account.
Genesis’ financial woes have affected Gemini and GOPAX (both are crypto exchanges) which have halted withdrawals. Gemini had partnered with Genesis for Gemini’s Earn program which offered interest bearing options to investors.
Genesis had massive and prolonged exposure with the once third largest crypto exchange FTX and failed crypto hedge fund, 3 Arrows Capital. After FTX filed for bankruptcy, 3 Arrows followed suit soon because of its exposure to FTX.
Bloomberg’s Sonali Basak posted Genesis’s bankruptcy filing on Twitter:
According to the bankruptcy filing (Official Form 204), it has over $3.4 billion in outstanding loans from around 50 plus creditors. Some reports state that earlier this week Securities and Exchange Commission (SEC) charged Genesis with offering unregistered securities in a partnership with Gemini.
On January 6, 2023, a crypto media outlet reported that Genesis had laid off 30% of its workforce in their second lay-off round to cut costs amid an ongoing downtrend.
In an email, a Genesis’ spokesperson said:
“We continue working with our advisors, in collaboration with Digital Currency Group and advisors appointed by various client groups, to evaluate options to preserve client assets and move business forward.”
A spokesperson from the company confirmed that: “As we continue to navigate unprecedented industry challenges, Genesis has made the difficult decision to reduce our headcount globally.”
The crypto market has been struggling since the end of 2021 with several crypto companies filing for bankruptcy throughout 2022. Among the top failures in crypto is one of the biggest and most disastrous events continuously troubling the market after its bankruptcy.
In November last year, Crypto lender BlockFi filed for Chapter 11 bankruptcy protection. The company explained that FTX’s collapse was the reason.
BlockFI’s competitors Celsius network and Voyager also filed for bankruptcy in 2022, citing unfavorable market conditions and unprecedented losses.
In BlockFi’s bankruptcy filing, FTX was listed as the 2nd largest creditor, with a loan of $275 million. The company owes over 100,000 creditors. Also, it would lay off two-thirds of its 292 employees, according to a separate filing.
As per reports, Galois Capital, a non-crypto company, has half of its capital stuck with FTX, which is around $100 million, and till date, the company is unable to recover its funds.
It seems that the company is still operating its business with half of its funds, and there is no way to recover the funds, and it is also assumed that in upcoming times the company may face severe drawbacks.
Similarly, Multicoin Capital had invested 10% of its total funds in FTX, but the company cannot recover those funds.
Over 100 companies and 50-plus individuals have invested or lended huge funds to FTX and its sister company.
More bankruptcy filings are expected this year even though Bitcoin might be showing signs of reaching its heyday price level.