Genesis Global Holdco LLC, the parent business of Genesis Global Capital, has now filed for Chapter 11 bankruptcy after two of 2022’s worst sector collapses. After FTX fell in late 2022, Genesis, which purportedly lost several hundred million dollars due to its exposure to collapsing cryptocurrency hedge fund Three Arrows Capital, has followed suit in quitting.
Genesis Global Holdco, LLC, Genesis Asia Pacific Pte Ltd, and Genesis Global Capital, LLC filed three voluntary bankruptcy petitions. Digital Currency Group owns all three. Genesis wants shared case management.
Genesis’ troubles
Genesis Global Capital, Gemini’s former Earn partner, estimated more than 100,000 creditors and $1 billion to $10 billion in obligations and assets in its petition. The other two corporations have assets and liabilities between $100 million and $500 million.
Genesis owes almost $3.5 billion to its top 50 creditors, including cryptocurrency exchange Gemini, trading giant Cumberland, Mirana, MoonAlpha Finance, and VanEck’s New Finance Income Fund, according to the bankruptcy filing reports that came up late Thursday.
Cameron Winklevoss of Gemini tweeted soon after the lawsuit was made public that the bankruptcy “is a key step towards us being able to collect your assets.” In the same tweets, Gemini’s CEO threatened to sue DCG’s Barry Silbert for debt payback. The post followed Winklevoss’ Twitter fight with DCG to reclaim the amount while dealing with exchange issues.
5/ We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices.
— Cameron Winklevoss (@cameron) January 20, 2023
Genesis and Grayscale, owned by DCG, filed for bankruptcy on Thursday, which may affect bitcoin. The Grayscale Bitcoin Trust (GBTC) controls more than $10 billion in assets and was trading at a record discount to net asset value late last year, but that gap has narrowed. Market participants worry that the Genesis bankruptcy might liquidate GBTC’s assets of over 600,000 bitcoin. However not only bitcoin may be affected.
Gemini to follow suit?
Gemini, a cryptocurrency exchange and custodian, 2022 started offering up to 7.4% APY on assets via a partnership with Genesis. Genesis and Gemini gave 7.4% deposit interest. Gemini’s bank-like product quickly attracted new bitcoin investors.
The APY was typical of centralized crypto lenders, while yield farming interest rates in decentralized finance (DeFi) were far higher and more volatile. Recently the SEC filed accusations of money laundering and other financial misconduct on Genesis based on the interest program with Gemini.
Today we charged Nexo Capital Inc. with failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle charges, Nexo agreed to pay $22.5 million and cease its unregistered offer and sale of the EIP to U.S. investors.
— U.S. Securities and Exchange Commission (@SECGov) January 19, 2023
The now-bankrupt Genesis agreed to pay $55 Million as well as seize operations on the interest program. This pinch could quickly spread to Gemini as the development could see them draw more attention from watchdogs as well as lose the trust of its customer base. Additionally, Gemini is one among those to who Genesis owes money.
