Crypto lender Genesis, a subsidiary of Digital Currency Group (DCG), has filed for Chapter 11 bankruptcy. The filing follows a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). Genesis claims that it has “sufficient liquidity to support its ongoing operations and facilitate the restructuring process.”
Genesis’ bankruptcy filing
Genesis Global Holdco LLC, the prime brokerage subsidiary of venture capital firm Digital Currency Group (DCG), announced Friday that it has voluntarily filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York.
The company’s lending subsidiaries, Genesis Global Capital LLC and Genesis Asia Pacific Pte. Ltd. are subject to the bankruptcy filing, while “other subsidiaries involved in derivatives, spot trading and custody activities and Genesis Global Trading is not included in the bankruptcy filing and will continue its client trading operations.”
“As part of its Chapter 11 filing, Genesis is proposing a roadmap to exit that includes a Chapter 11 plan.” The company elaborated, adding.
The plan envisions a two-track process of pursuing a sale, capital raise, and/or an equitization transaction that would allow the business to be established under new ownership.
Derar Islim, interim CEO of Genesis, explained that prior to filing for bankruptcy, the company was trying to “remedy liquidity issues” including those caused by the default of crypto hedge fund Three Arrows Capital (3AC) and the collapse of crypto exchange FTX Islim was appointed to his position last August, he explained.
Genesis claims to have more than $150 million in cash on hand that will “provide sufficient liquidity to support ongoing operations and facilitate the restructuring process.” The company has filed a petition in bankruptcy court “to allow day-to-day operations to continue as normal,” The company announced.
redemptions and new loans in the lending business will continue to be suspended and claims will be addressed in Chapter 11 proceedings.
Repayment to Gemini Earn Investors
In a court-supervised restructuring process, Genesis has been in discussions with creditors in hopes of “an overall solution for the lending business, which, if achieved, would provide an optimal outcome for Genesis’ customers and Gemini Earn users” and It explained that it plans to proceed with discussions with the lenders and its parent company, DCG.
Genesis and crypto exchange Gemini have been feuding over Gemini’s crypto lending program, Earn. Genesis froze withdrawals last November while holding about $900 million in investor assets from more than 340,000 Gemini Earn investors.
Gemini co-founder Cameron Winklevoss said on Twitter Friday that Genesis’ bankruptcy filing is an “important step” in allowing Earn’s clients to recover their assets. But he elaborated, noting that “importantly, the decision to put Genesis into bankruptcy does not absolve Barry [Silbert], DCG, and other wrongdoers from accountability.”
We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has harmed over 340,000 Earn users and others who were defrauded by Genesis and its accomplices.
“Unless Barry and DCG come to their senses and make a fair offer to their creditors, we will be filing suit against Barry and DCG shortly. We also believe that in addition to being obligated to return all money to creditors, Genesis, DCG and Barry owe creditors an explanation. The bankruptcy court will provide the necessary forum to do so,” the Gemini co-founder concluded.
Last week, the U.S. Securities and Exchange Commission (SEC) charged both Gemini and Genesis Global Capital “for offering and selling securities to retail investors without registration through the Gemini Earn crypto asset lending program.”
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