Cryptodebacle in focus: After crypto lending company’s bankruptcy: Genesis trading arm continues business as usual | news

• After FTX bankruptcy: Genesis files for Chapter 11 bankruptcy
• The crypto trading department continues as usual
• Long-term effects of the insolvency remain to be seen

Digital Currency Group’s subsidiary Genesis already suffered heavy losses from the collapse of crypto hedge fund Three Arrows Capital in 2022. The bankruptcy of crypto exchange FTX last November added further financial pressure, as Genesis had also lent crypto liquidity to crypto firms such as Alameda Research, FTX’s trading arm. And then, after FTX’s collapse, Genesis ran into payment difficulties. The credit division was particularly hard hit, halting customer withdrawals and new lending.


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Genesis files for bankruptcy

Most recently, Digital Currency Global had tried to reduce costs. According to an insider, DCG subsidiary Genesis laid off 30 percent of its employees. The group has also closed the headquarters of its asset management subsidiary, according to DCG CEO Barry Silbert.

However, that didn’t stop the crypto winter from claiming its next victim: A few days ago, Genesis filed for Chapter 11 bankruptcy.

“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 Three Arrows Capital’s insolvency and FTX’s insolvency, a court restructuring represents the most effective way to preserve assets and achieve that best possible outcome for all Genesis stakeholders,” said Derar Islam, Interim CEO of Genesis. Genesis currently has more than $150 million in cash on hand, “which will provide ample liquidity to support ongoing operations and to facilitate the restructuring process,” according to the company’s press release.

Crypto trading arm still active

While Genesis Global Holdco, LLC and two of its lending companies, Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd “filed voluntary applications under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York,” are “Genesis’ other subsidiaries engaged in derivatives, spot trading and custody business and Genesis Global Trading […] That means Genesis’ crypto trading arm is still moving money on blockchains, a sign that business is at least business as usual, CoinDesk — also a subsidiary of Digital Currency Group — reports.

According to the news portal, blockchain data compiled by Etherscan shows that on the day of the bankruptcy filing, a wallet controlled by the Genesis OTC Trading Desk sent about $125 million in Ether, Fantom and Tether to Coinbase, Binance, Bitstamp and Kraken. 50,000 ETH was sent to Coinbase, 20,000 ETH to Bitstamp and 5,000 ETH to Kraken, 7.7 million FTM worth about $2.4 million to Binance and 3.9 million USDT to Kraken. In the following days, the wallet made more transactions and received almost $50 million in USD coins.

However, it is still unknown how the insolvency of Genesis’ credit institutions will affect the spot and derivatives business in the long term.

Charles Story, head of growth at crypto index platform Phuture, said in an interview with CoinDesk that “Genesis’ reputation is in limbo”. That is why he is not very optimistic: “Maybe they will keep some old customers. Maybe. In terms of introducing new customers, there is no chance as long as it is about bankruptcy.”


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