Genesis Global Files for Bankruptcy
Posted by Colin Lambert. Last updated: January 23, 2023
In what was a well-flagged move, crypto prime broker Genesis Global, has filed for Chapter 11 bankruptcy, or as the firm puts it in a press release, it has initiated a process “to achieve global resolution to maximise value for clients and stakeholders and strengthen its business for the future”.
Genesis and its advisors have been engaged in ongoing, “productive” discussions with advisors to its creditors and corporate parent Digital Currency Group (DCG) to evaluate the most effective path to preserve assets and move the business forward, the firm says. Therefore it has now commenced a court-supervised restructuring process “to further advance these discussions and reach a holistic solution for its lending business, which, if achieved, would provide an optimal outcome for Genesis clients and Gemini Earn users”.
The filing covers the lending side of the business, Genesis says its other subsidiaries involved in the derivatives and spot trading and custody businesses and Genesis Global Trading are not included in the filing and continue client trading operations.
The company will initiate a marketing and sale process to monetise its assets or otherwise raise capital, as well as seek buyers for the business. If the marketing process does not result in a sale or capital raise, creditors will receive ownership interests in a reorganised firm, Genesis says.
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” says Derar Islim, interim CEO, Genesis. “We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution.”
Islim was appointed to his position in August 2022 as part of a series of leadership announcements to further strengthen the company’s governance and “position it for the future” (clearly in the form of a Chapter 11 filing).
“We have crafted a deliberate process and roadmap through which we believe we can reach the best solution for clients and other stakeholders,” says Paul Aronzon, an independent director at Genesis. “We look forward to advancing our dialogue with DCG and our creditors’ advisors as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future.”
Genesis says it has more than $150 million in cash on hand which will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process. It also is believed to have over $5.1 billion in liabilities.
It is fair to say that the filing has not gone down well with Cameron Winkelvoss, CEO of Gemini, who is seeking repayment of a $900 million loan. Ratcheting up the tension even further after weeks of arguments with DCG CEO Barry Sibert, within an hour of Genesis filing for Chapter 11 protection, Winkelvoss threatened to file a lawsuit against DCG and Sibert “imminently”, unless the load was repaid.
The spat, which is reminiscent of that between the heads of FTX and Binance, comes against a background of Securities and Exchange Commission charges for offering unregistered securities in the form of the Gemini Earn programme.