Crypto giant Genesis files for bankruptcy, after FTX collapse

Cryptocurrency lender’s bankruptcy is the latest blow to the sector following the arrest of Sam Bankman-Fried.

Crypto lender Genesis has filed for bankruptcy [File: Edgar Su/Reuters]

Genesis, one of the biggest cryptocurrency lenders, has filed for bankruptcy in the United States, becoming the latest casualty of the global crypto meltdown.

Genesis Global Capital filed for Chapter 11 bankruptcy protection late on Thursday in New York, with a court filing estimating the lenders’ assets and liabilities to both be in the range of $1bn-$10bn.

Parent group Genesis Global Holdco and lending unit Genesis Asia Pacific also filed for bankruptcy protection.

“Genesis has taken strategic actions to achieve a global resolution to maximize value for all clients and stakeholders and strengthen its business for the future,” the company said in a statement.

Genesis added that its subsidiaries involved in the derivatives, spot trading and custody businesses, as well as its brokerage arm Genesis Global Trading, were not included in the filing and would continue operations.

Genesis halted customer withdrawals in November following the stunning collapse of FTX and had been negotiating with creditors and trying to secure fresh capital since.

Genesis’s owner Digital Currency Group (DCG), which is backed with investments by Softbank and Alphabet, had been exploring the sale of assets to pay back more than $3bn owed to creditors, the Financial Times reported earlier this month, citing unnamed people familiar with the matter.

The crypto lender earlier this month laid off 30 percent of its staff, the Wall Street Journal reported.

Genesis’ owner DCG said in a statement that neither DCG nor its employees, including those sitting on the Genesis board, were involved in the decision to file for bankruptcy.

“Genesis has its own independent management team, legal counsel, and financial advisors, and appointed a special committee of independent directors, who are in charge of the Genesis Capital restructuring,” the statement said.

Genesis’s bankruptcy comes as the firm is under heightened regulatory scrutiny after the US Securities and Exchange Commission (SEC) on January 12 charged the lender and crypto exchange Gemini with selling unregistered securities in connection with a high-yield product called Earn.

Genesis is also embroiled in a high-profile dispute with Gemini, owned by the former Olympic rowers Cameron and Tyler Winklevoss, over the fate of $900m in assets that Gemini customers deposited with the lender.

Genesis’s bankruptcy is the latest hammer blow for the crypto sector, which is still reeling from the collapse of FTX and the arrest of its founder, Sam Bankman-Fried.

Bankman-Fried, once among the most celebrated names in crypto, is facing eight charges related to the implosion of his crypto empire, including that he lied to investors and syphoned off billions of dollars of customer funds for personal use.

Bankman-Fried has pleaded not guilty to all charges, insisting he did not steal any funds.

Source: Al Jazeera and news agencies