Crypto lender Genesis files for bankruptcy in latest blow to Barry Silbert's DCG empire

Crypto lender Genesis filed for Chapter 11 bankruptcy extortion precocious Thursday nighttime successful Manhattan national court, the latest casualty successful the manufacture contagion caused by the illness of FTX and a crippling stroke to a concern erstwhile astatine the bosom of Barry Silbert's Digital Currency Group.

The institution listed implicit 100,000 creditors successful a "mega" bankruptcy filing, with aggregate liabilities ranging from $1.2 cardinal to $11 cardinal dollars, according to bankruptcy documents.

Three abstracted petitions were filed for Genesis' holding companies. In a statement, the institution noted that the companies were lone progressive successful Genesis' crypto lending business. The company's derivatives and spot trading concern volition proceed unhindered, arsenic volition Genesis Global Trading.

"We look guardant to advancing our dialog with DCG and our creditors' advisors arsenic we question to instrumentality a way to maximize worth and supply the champion accidental for our concern to look well-positioned for the future," Genesis interim CEO Derar Islim said successful a statement.

The filing follows months of speculation implicit whether Genesis would participate bankruptcy protection, and conscionable days aft the Securities and Exchange Commission filed suit against Genesis and its onetime partner, Gemini, implicit the unregistered offering and merchantability of securities.

Genesis listed a $765.9 cardinal indebtedness payable from Gemini successful Thursday's bankruptcy filing. Other sizeable claims included a $78 cardinal indebtedness payable from Donut, a high-yield, decentralized platform, and a VanEck fund, with a $53.1 cardinal indebtedness payable.

Gemini co-founder Cameron Winklevoss initially responded to the quality connected Twitter, penning that Silbert and DCG "continue to garbage to connection creditors a just deal."

"We person been preparing to instrumentality nonstop ineligible enactment against Barry, DCG, and others," helium continued.

"Sunlight is the champion disinfectant," Winklevoss concluded.

Genesis is successful negotiations with creditors represented by instrumentality firms Kirkland & Ellis and Proskauer Rose, sources acquainted with the substance told CNBC. The bankruptcy puts Genesis alongside different fallen crypto exchanges including BlockFi, FTX, Celsius, and Voyager.

FTX's collapse successful November enactment a frost connected the marketplace and led customers crossed the crypto scenery to question withdrawals. The Wall Street Journal reported that, pursuing FTX's meltdown, Genesis had sought an exigency bailout of $1 billion, but recovered nary funny parties. Parent institution DCG, which owes creditors a mounting indebtedness of much than $3 billion, suspended dividends this week, CoinDesk reported.

Genesis provided loans to crypto hedge funds and over-the-counter firms, but a bid of atrocious bets made past year severely damaged the lender and forced it to halt withdrawals connected Nov. 16.

The New York-based steadfast had extended crypto loans to Three Arrows Capital (3AC) and Alameda Research, the hedge money started by Sam Bankman-Fried and intimately linked to his FTX exchange.

3AC filed for bankruptcy successful July successful the midst of the "crypto winter." Genesis had loaned implicit $2.3 cardinal worthy of assets to 3AC, according to tribunal filings. 3AC creditors person been warring successful tribunal to retrieve adjacent a sliver of the billions of dollars that the hedge money erstwhile controlled.

Meanwhile, Alameda was integral to FTX's eventual demise. Bankman-Fried has repeatedly denied cognition of fraudulent enactment wrong his web of companies, but remains incapable to supply a important mentation for the multibillion-dollar hole. He was arrested successful December, and is released connected a $250 cardinal enslaved up of his trial, which is acceptable to statesman successful October.

Genesis had a $2.5 cardinal vulnerability to Alameda, though that presumption was closed retired successful August. After FTX's bankruptcy successful November, Genesis said that astir $175 cardinal worthy of Genesis assets were "locked" connected FTX's platform.

Genesis' fiscal spiral has exposed Silbert's broader DCG empire. The genitor institution was forced to instrumentality implicit Genesis' $1 cardinal liability stemming from 3AC's collapse. In a aboriginal missive to investors, Silbert disclosed an further $575 cardinal indebtedness from Genesis to DCG for undisclosed investing purposes.

DCG pioneered publically traded trusts, allowing investors to clasp bitcoin and different currencies successful their portfolio without nonstop exposure. Grayscale Bitcoin Trust's discount to nett plus worth widened significantly past twelvemonth arsenic assurance successful the conglomerate waned.

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