For the crypto industry the year 2023 continues right along from the year 2022.
It’s in step with the devastation caused by the fall of former crypto king Sam Bankman-Fried’s empire.
This empire included the FTX cryptocurrency exchange and its sister company, Alameda Research, a hedge fund that also serves as a trading platform for institutional investors.
FTX and Alameda were two players at the center of the crypto sector. so their bankruptcy unsurprisingly shook the entire industry. The came the bankruptcy of lender BlockFi.
Now, another eminent firm may be close to collapsing. The Genesis lender is on the verge of bankruptcy, The Wall Street Journal reported on Jan. 5.
Genesis is working with investment bank Moelis & Co. to evaluate its options, including a potential Chapter 11 bankruptcy filing, the Journal reported, citing sources close to the matter.
The company has also decided to take emergency measures, in particular the elimination of 30% of its workforce, according to the newspaper.
“Genesis remains focused on finding a solution for our borrowing and lending intermediation business and reaching the best outcome for all affected clients,” a spokesperson said in an emailed statement.
“We continue working with our advisors, in collaboration with DCG and advisors appointed by various client groups, to evaluate options to preserve client assets and move the business forward.”
“While we are committed to moving as quickly as possible, this is a very complex process that will take some additional time,” the spokesperson added without disputing the report.
Genesis: ‘Progress in Refining Our Business’
In a note sent to customers on Jan. 4, interim CEO Derar Islim discussed cost reductions and said Genesis was exploring options for its future.
“We have made significant progress in refining our business plans for Genesis’ client offerings,” Islim wrote in the letter. “This includes reducing costs and driving efficiencies in all our business lines.
“We believe our continued focus on further sharpening our business will move us in the right direction as we begin the new year, as well as providing more options for working out the lending business.”
Last November, the brokerage stopped customers from making withdrawals and issuing new loans. The division that has halted the withdrawals is Genesis Global Capital, which works with institutional clients and had $2.8 billion in total active loans as of the end of the third quarter.
The company had $175 million locked in its FTX trading account.
A Genesis bankruptcy filing would also affect the Gemini cryptocurrency exchange founded by the billionaire twin brothers Tyler and Cameron Winklevoss.
Genesis is Gemini’s partner in a reward program offered by the platform to attract customers. This program is called Gemini Earn. It’s a high-yield savings product that promises customers of the cryptocurrency exchange up to an 8% annual return on crypto deposits, depending on which assets are held. Under this program, Genesis serves as Gemini’s primary lender.
Genesis owes $900 million to Gemini’s Earn users. Gemini was also forced to pause withdrawals related to Gemini Earn following the decision of Genesis, which is owned by crypto juggernaut Digital Currency Group.
For several weeks the two companies have been trying to solve the problem, but apparently things are not moving forward. So says Cameron Winklevoss in an open letter to Barry Silbert, the founder and CEO of DCG, posted on Twitter.
Genesis has spent the past several weeks seeking at least $1 billion in fresh capital, according to several reports.
The firm has three primary business lines: spot and derivatives trading, lending and borrowing, and custody.
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