Key Takeaways:
- Genesis Trading might be planning to file for a Chapter 11 bankruptcy.
- Moreover, the firm has laid off 30% of its workforce.
NEW DELHI (CoinChapter.com) — Genesis Trading might be planning to file for a Chapter 11 bankruptcy, claim people familiar with the matter. If true, the Genesis Chapter 11 bankruptcy might be the latest blow to the already beleaguered cryptocurrency sector.
Genesis, the crypto lending arm of Barry Silbert’s Digital Currency Group (DCG), has been in trouble since Aug last year. The firm had exposure to Three Arrows Capital (3AC), which bore significant losses due to the Terra ecosystem collapse in 2022.
In Jul 2022, Genesis filed a $1.2 billion claim against 3AC because of breached loans. The firm acknowledged that it was “not immune to the market drop and the damage to overall sentiment” in a report on second-quarter market observations.
The fallout from the 3AC exposure forced Genesis to slash 20% of its workforce and fire its CEO in Aug. Silbert’s crypto lending firm rose dramatically during the 2021 crypto boom, with its loan originations surging more than 700% to $131 billion.
Related: What Will Happen To The Altcoin Market If Grayscale Liquidates To Save Genesis?
Before Genesis could recover from Terra’s gut punch, Sam Bankman-Fried’s FTX fiasco dealt another blow to the crypto lending arm of DCG. The firm became a victim of the “unprecedented market turmoil” that FTX created. As a result, genesis halted customer withdrawals on the platform in Nov 2022 due to a “liquidity crunch.”
On Nov 22, 2022, Genesis announced it was working with investment bank Moelis & Company to restructure itself. However, unnamed sources told the WSJ that a potential Chapter 11 filing was not off the table.
Genesis Lays Off 30% Of Its Staff
The Genesis bankruptcy rumors gained traction from news of the firm axing 30% of its employees. The latest workforce reduction marks the second round of layoffs for the firm in less than six months.
2022 saw several crypto firms filing for bankruptcy for several reasons, ranging from the Federal Reserve’s hawkish stance to blowups in the nascent sector that trickled down to other companies. Crypto-focused bank Silvergate Capital also announced it was laying off 40% of its staff.
At Genesis, reports suggest sales and business-development departments were especially hard hit.
As we continue to navigate unprecedented industry challenges, Genesis has made the difficult decision to reduce our headcount globally. These measures are part of our ongoing efforts to move our business forward.
A Genesis spokesperson said in a statement.
The layoffs came after the firm hinted that it would reduce costs and drive efficiencies during troubled times in the crypto sector. Moreover, Genesis assured clients that it was determined to reach “the best outcome for all affected clients.”
However, a Genesis chapter 11 filing might further erode investor confidence in the crypto sector and its parent firm DCG.
