Cryptocurrency broker Genesis has placed its lending unit into Chapter 11 bankruptcy, becoming the latest casualty of the fallout from the implosion of Sam Bankman-Fried’s digital asset exchange FTX last year.
Genesis’s lending business, which offered customers the ability to lend out their coins in exchange for high returns, owes creditors more than $3bn, the Financial Times previously reported, including hundreds of millions of dollars to customers of Gemini, the crypto exchange of Cameron and Tyler Winklevoss.
Genesis and its owner, SoftBank-backed crypto conglomerate Digital Currency Group, have been in negotiations with creditors since November.
“An in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Genesis interim chief executive Derar Islim.
Genesis is the latest crypto company to be wrongfooted by the failure of FTX, which has sent shockwaves through the industry, pushing firms including lender BlockFi into bankruptcy last year, and the value of popular coins plunging.
In its Chapter 11 filing with the bankruptcy court for the Southern District of New York, Genesis’s lending unit and an Asia-Pacific subsidiary each listed assets and liabilities in the range of $100mn-$500mn. Genesis Global Capital, another subsidiary, listed an asset and liability range of $1bn-$10bn, as well as more than 100,000 creditors.
Gemini customers are owed $766mn, according to the bankruptcy filing; Gemini had previous said they were owed roughly $900mn.
Among the top 50 creditors are former SoftBank executive Marcelo Claure’s family office, which is owed $45.9mn, and Cumberland, the crypto trading arm of market maker DRW, which is owed $18.7mn, according to bankruptcy filings.
Jewellery company Levity + Love, gaming firm Big Time Studios and non-profit payment group Stellar Development Foundation are also among the crypto lender’s top creditors.
Genesis said it had more than $150mn in cash on hand, which would provide liquidity to support its business operations and facilitate the restructuring process.
Genesis’s trading and custody units were not involved in the filings, the company said.
Genesis is the biggest unsecured creditor of FTX, the $32bn crypto exchange that itself filed for bankruptcy in November. In the wake of FTX’s collapse, Genesis clients sought to pull back $827mn worth of money they lent to the crypto broker, requests it was unable to meet, the company said in bankruptcy filings. It then halted customer withdrawals.
Genesis is owed $226.3mn from the FTX bankruptcy estate, according to court documents filed on Thursday, underscoring the impact of the implosion of Bankman-Fried’s exchange on the crypto broker.
Digital Currency Group, which is backed by investors including Singapore’s GIC and Alphabet’s venture arm CapitalG, had been searching for outside funding since tensions with creditors burst open this month.
The group is locked in a dispute with the Winklevoss twins, whose Gemini exchange used Genesis in its crypto asset lending programme. Cameron Winklevoss has called for DCG’s board to sack its chief executive Barry Silbert, saying he was “unfit” to run the group.
Following the bankruptcy filing, Winklevoss wrote on Twitter that DCG and Silbert “continue to refuse to offer creditors a fair deal”, but added that the filing was “a crucial step” for Gemini to recover user assets.
“Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” he wrote.
Last week, the US Securities and Exchange Commission sued Genesis and Gemini over the lending programme, saying it was not properly registered as a securities offering.
Gemini ended the programme this month, but retail investors, who loaned their crypto tokens to Genesis in exchange for interest rates as high as 8 per cent, remain unable to make withdrawals, according to the regulator.
Genesis declined to provide further comment. DCG did not immediately respond to a request for comment.
This story has been amended to clarify that it is Genesis’s lending unit that has filed for bankruptcy protection
