Genesis Attempting to Cover Shortfall Without Filing Bankruptcy

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According to a Bloomberg report, cryptocurrency lending company Genesis, suspended services in its lending arm on November 16, 2022 and spent the whole of last weekend in an unsuccessful attempt to raise funds. [See, e.g.Beyoud, L., Hajrik, V. and Shen, M. Crypto Brokerage Genesis Is Said to Warn of Bankruptcy Without Funding. (Accessed November 22, 2022)]. Genesis became one of the cryptoverse's largest players having opened the first OTC trading desk back in 2013. However, like many of its peers, the FTX fallout has Genesis facing a shortfall due in part to abnormal patterns of withdrawal.

To bridge the shortfall, initially Genesis was on the hunt to fundraise $1 Billion. [Ozawa, R. and Nelson, J. Genesis Trading Warns of Possible Bankruptcy as Post-FTX Fundraising Falters: Report. (Accessed November 22, 2022)]. But The Block now reports that Genesis has cut its fundraising ask to $500 Million in emergency funding to shore up the liquidity profile of the Lending Unit; without this funding Genesis faces bankruptcy [See, e.g. Chaparro, F. Tweet. (Accessed November 22, 2022)].

In a series of tweets on November 16, 2022, Genesis explained specifically how its current situation developed. These tweets are set forth herein at length as follows:

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Nonetheless, besides this bleak outlook for Genesis's future, a Genesis spokesperson told many tech news outlets that any filing of a bankruptcy petition is not imminent and that it is still conducting 'constructive' discussions with creditors. More specifically:

We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.

[Coghlan, J. Genesis denies ‘imminent’ plans to file for bankruptcy. (Accessed November 22, 2022)].

As reported by The Wall Street Journal, Genesis approached crypto exchange Binance for funding and to bid for Genesis's loan book. However, citing potential future conflicts of interest, Binance decided not to invest in Genesis. Additionally, Genesis approached Apollo Global Management for funding assistance, but there is no further report on the Genesis-Apollo status. [See, e.g. Huang, V., Kowsmann, P. and Ostroff, C. Crypto Lender Genesis Asks Binance and Apollo for Cash. (Accessed November 22, 2022)].

Since its public statements on November 16, 2022, Genesis has been forebodingly silent on this situation. All this silence has accomplished is to spur concerns of yet another crypto contagion sweeping the crypto industry. [See, e.g. Kim, C. Silence from Digital Currency Group's Genesis spooks crypto. (Accessed November 22, 2022)].

For those unfamiliar with Genesis, Digital Currency Group is the parent company of Genesis. [Grayscale Investments is one of Genesis's more well known sister companies]. DCG is along the largest crypto companies with a valuation as of last year of $10 billion, holding investments in some 165 companies including Coinbase, Ripple and Ledger.

As such, some concern over the state of Genesis is warranted as any injury to DCG would have repercussions throughout the cryptoverse. And as the markets await the promised update from Genesis this week, CT is abuzz with open debate concerning not only the health of Genesis, but of DCG and it other affiliates as well. [See e.g. Kim, supra].

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