Crypto Lender Genesis Files For Chapter 11

The repercussions of the FTX collapse last November continue to be felt, as crypto lender Genesis Trading filed for Chapter 11 bankruptcy protection.

The filing was made late Thursday in a Manhattan federal court, and comes after it suffered crippling losses from the collapses of FTX and hedge fund Three Arrows Capital, CNBC reported.

The firm reportedly listed over 100,000 creditors in a “mega” bankruptcy filing, with aggregate liabilities ranging from $1.2 billion to $11 billion dollars, according to bankruptcy documents.

Chapter 11

Three separate petitions were filed for Genesis’ holding companies, CNBC noted – all of which were only involved in Genesis’ crypto lending business.

CNBC reported that the company’s derivatives and spot trading business will continue unhindered, as will Genesis Global Trading.

“We look forward to advancing our dialogue with DCG and our creditors’ advisors as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future,” Genesis interim CEO Derar Islim said in a statement.

CNBC reported that the Chapter 11 filing comes after months of speculation over whether Genesis would enter bankruptcy protection, and just days after the Securities and Exchange Commission filed suit against Genesis and its onetime partner, Gemini, over the unregistered offering and sale of securities.

Genesis has reportedly listed a $765.9 million loan payable from Gemini in Thursday’s bankruptcy filing.

Other sizeable claims included a $78 million loan payable from Donut, a high-yield, decentralised platform, and a VanEck fund, with a $53.1 million loan payable.

Genesis is in negotiations with creditors represented by law firms Kirkland & Ellis and Proskauer Rose, sources familiar with the matter told CNBC.

New York-based Genesis provided loans to crypto hedge funds and over-the-counter firms.

But its collapse is being blamed on a number of bad bets made last year which severely damaged it and forced it to halt withdrawals on 16 November.

Missteps include Genesis extending crypto loans to Three Arrows Capital (3AC) and Alameda Research, the hedge fund started by Sam Bankman-Fried and closely linked to his FTX exchange.

3AC filed for bankruptcy in July CNBC noted.

Tough times

It has been a tough time for the crypto market, exchanges and lenders.

Earlier this week Singapore-based Crypto.com said it would will lay-off 20 percent of its workforce, after previously reassuring nervous investors that it was in good financial health, following the collapse of FTX in November.

But there has been a series of Chapter 11 bankruptcy filings from the likes of Celsius Network, Voyager Digital, then FTX, followed by BlockFi and then Core Scientific.