Genesis Bankruptcy: Multibillionaire Silbert's Crypto Empire Implodes

Posted 8 days ago


Popular cryptocurrency broker Genesis has filed for bankruptcy, insiders have revealed.

The filing made its way through the U. S. bankruptcy court Thursday, and comes as the latest crypto casualty following the spectacular downfall of Sam Bankman-Fried's FTX, where the lender held some of its funds.

Previous reports aired this week indicated the company had been in the midst of the now finished Chapter 11 paperwork, as it works toward a deal with over 100,000 creditors who found themselves out of their investments following FTX's collapse.

The company, which is owned by venture capital firm Digital Currency Group, had reportedly been considering filing for bankruptcy for some time, owing creditors a sum believed to be more than $3billion.

Among those owed money is Gemini, owned by Cameron and Tyler Winklevoss, which reportedly saw more than $900million of its customers' funds evaporate from the exchange after Bankman-Fried's own Chapter 11 filing in November.

The statuesque twins - perhaps best known for their protracted legal battle with fellow billionaire Mark Zuckerberg made famous in The Social Network - were among many to record losses when FTX fell.

Cameron and his brother's exchange used Genesis as its main lending partner, leaving the brothers - and millions of their customers - in the red as a result.

In its filing Thursday, Genesis' lending unit wrote that the company - which has asserted it cannot afford to pay back the billions owed to creditors - still had both assets and liabilities somewhere in the range of $1 billion to $10 billion.

Lenders like Genesis, founded by crypto magnate Barry Silbert, suffered steep losses from loans it supplied FTX's now-defunct trading firm Alameda Research and its hedge fund backer Three Arrows Capital, both of which filed for bankruptcy.

A new report published Wednesday by Bloomberg revealed that as figures such as Winklevosses seek to recover sums lent to Genesis, the New York based-lender had alreday resigned that it cannot raise the funds to pay back its creditors.

It comes as the full brunt of FTX' monumental crash late last year has seemingly been yet to be felt, amid concern that other, connected companies could also fall in the wake of the exchanges collapse.

In all, Genesis and its owner Digital Currency Group owe creditors a sum reported to be more than $3billion.

According to Bloomberg, the cryptocurrency lending unit of Genesis's Digital Currency Group has been in secret talks with creditor groups, including Gemini, amid its liquidity crunch.

However, those talks have seemingly fallen flat, according to insiders who spoke to Bloomberg and other outlets, after Cameron Winklevoss called for Digital Currency Group board to sack its chief executive, accusing him of not providing ample reason for not providing refunds during the creditor talks.

The company - which is headed by Silbert - had previously warned in that it may need to file for bankruptcy if it fails to raise the cash necessary to appease creditors.

Financial pressure at Silbert’s Singapore based crypto backer - whose subsidiaries also include CoinDesk, Foundry, Grayscale Investments and Luno - began to emerge after the financial implosion of Three Arrows Capital in November following the collapse of FTX.

Genesis, once one of the biggest crypto lenders in the world, subsequently halted customer withdrawals - citing 'unprecedented market turmoil' and issues relating to the firm's liquidity.

The crypto lender has since scrambled to find funding, albeit unsuccessfully - all while cutting costs to avoid a now reportedly inevitable bankruptcy filing to escape responsibility for the lost funds.

A Genesis bankruptcy would come as a significant blow for Silbert’s crypto group, a venture capital firm that currently encompasses much of the digital currency market.

The cryptocurrency' firm's collapse would also trigger a repayment of an outstanding $350million left from a $600 million loan to the company from Chelsea FC owner Todd Boehly’s investment group Eldridge, which backed Digital Currency Group through senior secured debt in November 2021.

Those familiar with the firm's financial situation have said that according to the agreement reached by the two parties, the remaining amount from the loan would be due immediately if any of its subsidiaries - including Genesis ever underperforms.

Meanwhile, the Winklevosses - who were quick to capitalize on a $20million settlement from Facebook to become early adopters in the crypto sphere - are still  owed the nearly $1billion sum by the embattled crypto broker.

The Harvard grads last month created a committee of creditors to try to recover their lost investment - but have since been named in a class action fraud lawsuit filed by Gemini clients claiming the duo duped customers out of the $900 million that was lent to Genesis.... (Read more)

Tweets mentioned: