Genesis Global Holdco LLC, the holding company of crypto lending firm Genesis Global Capital, filed for Chapter 11 bankruptcy protection following months of speculation of an impending bankruptcy filing by the crypto lender in part due to FTX’s collapse. Remember that Genesis Global had halted withdrawals due to “unprecedented market turmoil” caused by FTX, which resulted in many withdrawals that allegedly exceeded Genesis’ liquidity. Meanwhile, the crypto lender was already facing a liquidity crisis following the collapse of hedge fund Three Arrows Capital in June last year.
According to the filings, Genesis Global Capital owes more than a thousand creditors and has between $1 billion and $10 billion in liabilities and assets. Genesis’ top 50 creditors include crypto firms like Gemini, MoonAlpha Finance, Cumberland, and VanEck’s New Finance Income Fund. Genesis and Gemini jointly offered a Yield Product called “Earn” to Gemini’s customers. However, these customers have been unable to access their funds, with Gemini’s owners, The Winklevoss Twins, claiming that Genesis owes more than $900 million to 340,000 Earn investors.
Is DCG Affected By Genesis’ Bankruptcy?
Digital Currency Group (DCG) is the parent company of Genesis Global Capital. As such, the company is involved in the current financial crisis involving its subsidiary. And although DCG was quick to distance itself from the affairs in a statement released by the company following Genesis’ bankruptcy filings, top creditors like Gemini have continued to be on the heels of DCG to recover the money owed to them by Genesis.
Furthermore, DCG and its CEO Barry Silbert have been involved in a public dispute with Genesis’ top creditor Gemini with Gemini’s co-founder Cameron Winklevoss calling for the removal of Barry Silbert as chief executive of DCG. Winklevoss was quick to react to Genesis’ bankruptcy filing and threatened to sue Silbert to recover the loan owed by Genesis.
How Will Genesis’ Bankruptcy Filing Affect The Crypto Market and Industry?
Genesis’s bankruptcy filing hasn’t negatively affected the crypto market so far. Instead, the market seems unfazed by the news, with Bitcoin breaking the $22,000 resistance level and up by over 6% in the last 24 hours. This positive price movement could be because the crypto market had already priced in on the news long before Genesis filed for bankruptcy. On the other hand, this recent development could have damning consequences for other crypto firms, especially those with exposure to Genesis, like the crypto exchange Gemini. Just as Genesis is a domino from FTX’s collapse, we could have subsequent dominoes from Genesis’ collapse.
Furthermore, Genesis’ bankruptcy filing could still hurt Bitcoin’s price if Genesis’ sister company, Grayscale, becomes a contagion from this situation. The digital assets manager operates the Grayscale Bitcoin Trust (GBTC) and is one of the largest Bitcoin holders. As such, there are market concerns that Genesis’s bankruptcy could lead to the liquidation of GBTC’s holdings of over 600,000 BTC. Such development will likely halt Bitcoin’s run and see its price decline drastically while dragging the whole crypto market alongside.
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