Crypto Firm Genesis Global Holdco Files for Bankruptcy Owing $3.4B

Cryptocurrency firm Genesis Global Holdco and two of its subsidiaries have filed for Chapter 11 bankruptcy protection.

The filing includes two of its lending business subsidiaries — Genesis Global Capital and Genesis Asia Pacific — but does not include its derivatives and spot trading, custody and Genesis Global Trading businesses, the company said in a Thursday (Jan. 19) press release.

“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,” Genesis Interim CEO Derar Islim said in the release.

Genesis, which is a unit of Digital Currency Group (DCG), owes its top 50 creditors about $3.4 billion. Among them are lenders that were part of an agreement with Gemini Trust, who are collectively owed about $766 million, according to the filing.

As PYMNTS reported Wednesday (Jan. 18), Genesis was the main partner in the Gemini Earn program, in which retail investors were to lend out cryptocurrency and get a fixed stream of returns.

Gemini halted withdrawals from the program in November after Genesis said “unprecedented market turmoil” resulted in it lacking the liquidity to cover its redemption requests.

On Jan. 12, both Genesis and Gemini were charged by the Securities and Exchange Commission (SEC) with offering unregistered securities.

The complaint centers on the Gemini Earn program, which the SEC said enabled the two companies to raise billions of dollars’ worth of crypto assets from hundreds of thousands of investors who weren’t provided necessary information.

With its Chapter 11 filing, Genesis aims to resolve all claims through a trust that will distribute assets to creditors and emerge under new ownership.

“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 Independent Director Paul Aronzon said in the release.