Genesis Global Capital Explores Options To Avoid Bankruptcy

LUCKNOW (Coinchapter.com): Financially troubled cryptocurrency lender Genesis global capital is actively pursuing all avenues possible to avoid bankruptcy, according to Bloomberg. The news report comes during a tough period for crypto-related firms, some struggling to stay afloat following the FTX crisis.

Genesis scrambles to stay alive.

According to the report, law firms Proskauer Rose and Kirkland & Ellis were being consulted by creditor groups to keep operations running at Genesis. Furthermore, Derar Islim, the Interim CEO of Genesis Global Capital, told Reuters –

“We’ve begun discussions with potential investors and our largest creditors and borrowers, including Gemini and DCG, to agree on a solution that shores up our lending business’ overall liquidity and addresses clients’ needs.”

Islim’s remarks clarified an increasingly uncertain future for Genesis Global Capital. The lending unit halted customer withdrawals on Nov 16, citing “extreme market dislocation” and “loss of industry confidence” caused by the FTX meltdown.

Genesis disclosed that its derivatives unit had about $175 million in locked funds in its FTX trading account. 

Meanwhile, Barron’s said state regulators were probing Genesis Global Capital for a possible violation of security laws. The investigations concerned whether Genesis and other companies persuaded residents to invest in crypto assets without proper registrations.

Other reports claimed that Genesis Global Capital had hired investment bank Moelis & Company to explore restructuring options, including potential bankruptcy. However, no final decisions made have been made thus far.

Last week, Barry Silbert, founder of parent firm Digital Currency Group (DCG), revealed that DCG borrowed around $575 million from Genesis at “prevailing market interest” rates,” which are due in May 202″. It also absorbed the $1.1 billion debt that the now defunct crypto hedge fund Three Arrows Capital owed Genesis.

Notably, Genesis reportedly massive losses in 2022 due to loans made to Three Arrows Capital.

Companies caught in FTX Implosion

The fallout resulting from the FTX contagion has been brutal for the crypto industry. Besides catering to over a Million investors, many of which held their lifelong savings in FTX, several crypto firms also had exposure to FTX.

Just weeks after FTX shut down its operations, crypto lender BlockFi spiraled into bankruptcy proceedings. In its Chapter 11, BlockFi said it owed money to more than 100,000 creditors. The second largest creditor listed is FTX, which owes BlockFi $275 million.

In early November 2022, hedge fund Galois Capital revealed that about half of its capital was “stuck” on FTX, which amounts to “early $100 million. Co-founder Kevin Zhou said it could take “a few years” to recover so”e, if not a”l, of those assets.

Meanwhile, analysts claim several other industry figureheads could be in deep waters following the FTX implosion. For example, questions have been asked of Coinbase, Crypto.com, and even the world’s largest crypto exchange reserves.