Get Ready to Check Off Another - Genesis Reportedly Readying to File Bankruptcy

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In a Bloomberg report dated January 18, 2023, it was first noted that previously Genesis was considering a bankruptcy filing due to a liquidity crunch and an inability to raise capital. Now nevertheless, it is reported that Genesis is laying the necessary groundwork for a bankruptcy filing as early as this week.

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Digital Currency Group, the parent company of Genesis, likewise is experiencing tough times and is dealing with a liquidity crunch of its own. Genesis also finds itself embroiled in a battle with Gemini crypto exchange (owned by the Winklevoss brothers) over a crypto lending product known as 'Earn'. In fact, on January 12, 2023, the SEC had charged both Genesis and Gemini with offering 'unregistered securities' through Gemini's 'Earn' product.

Cameron Winklevoss, a co-founder of Gemini, has posted on the internet several open letters to Barry Silbert, DCG CEO, wherein he claimed Genesis owed Gemini $900 Million resulting from a loan surrounding the 'Earn' project. DCG has labeled Winklevoss' comments 'malicious, fake, and defamatory'.

Presently, Genesis has focused its attention on the refining of its balance sheet through a reduction of expenses. Trapped in this hellish crypto winter, Genesis has halted the payments of its dividends.

Much of Genesis' liquidity dilemma is most likely attributable to the 2022 failure of crypto venture capital firm Three Arrows Capital. Barry Silbert informed shareholders that Genesis was owed $447.5 Million and 4550 Bitcoin (worth about another $78 Million at the time) from Three Arrows Capital. Additionally, Genesis held approximately $175 Million against FTX prior to its November bankruptcy. This FTX exposure likely added to Genesis' instability and liquidity crunch thereby increasing the potential of insolvency. It should be noted, Genesis halted all withdrawals shortly following the FTX bankruptcy filing.

If Genesis files bankruptcy, it joins a growing list of companies that have already filed including Terra, Voyager Digital, Celsius, Three Arrows Capital, BlockFi, and FTX.

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