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Who Might Pose As Genesis’ Saving Grace?

  • Genesis creditors are negotiating with law firms.

  • The firm is looking for a $1 billion bailout investment.

  • Bankruptcy may be unavoidable if a bailout cannot be secured.

01 Dec 2022 By: Shikha Jha
Who Might Pose As Ge

For numerous crypto firms, 2022 signified as the end of the line. 

A few appear to have vanished overnight. However, Genesis' creditors are making urgent pleas to prevent the crypto brokerage from going bankrupt.

Creditors are banding together with liquidation and restructuring lawyers to keep the firm afloat. On November 16, the crypto lending platform halted withdrawals.

According to a Bloomberg report, the firm's creditors have hired restructuring lawyers and are looking for ways to avert a scenario similar to crypto exchange FTX's rapid demise. Creditor groups are consulting with law firms Proskauer Rose and Kirkland & Ellis.

A Genesis spokesperson was cited as saying: "Our goal is to fix the current lending situation without the necessity for a bankruptcy filing."

Big Outstanding Balance Sheet at Genesis

As per reports, Genesis has approximately $2.8 billion in outstanding loans on its balance sheet. Almost one-third of that was made to connected firms, including the parent company, Digital Currency Group (DCG).

Its difficulties are caused by unpaid loans with Alameda. It also had large loans from the now-defunct crypto hedge fund Three Arrows Capital (3AC). Over the weekend, DCG disclosed a $2 billion debt, the majority of which is owed to Genesis.

Genesis requested for $1bn emergency loan to avoid bankruptcy

Genesis spent several days attempting to secure $1 billion in funding from potential investors but failed. It was also said to be in talks with Binance about a fresh funding infusion. However, the crypto exchange decided to reject the offer due to a potential conflict of interest with some of its prospective activities.

Interim CEO Derar Islim announced last week that Genesis has begun conversations with possible investors. It has also engaged with its major creditors and borrowers, including the Gemini exchange and DCG. Islim noted that “the primary goal is to agree on a solution that strengthens lending business' overall liquidity and fulfils clients' needs.”

What’s Next

The FTX debacle has prompted various US regulatory agencies to initiate investigations into not only the defunct crypto exchange but also other centralized gatekeepers. As per reports, the Alabama Securities Commission and several states are investigating Genesis Global Capital for securities law violations.

However, if Genesis failed to secure a sufficient amount of funding we will definitely witness another crypto firm going bankrupt due to FTX's demise.

What do you think, will Genesis survive or will it implode like BlockFi? Share your views in the comments section below.

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