Crypto lender Genesis files for bankruptcy

  • In Business
  • 2023-01-20 09:10:22Z
  • By BBC
Genesis logo with coins in the background
Genesis logo with coins in the background  

Cryptocurrency lender Genesis has filed for bankruptcy.

The firm had recently been charged by US regulators Securities and Exchange Commission (SEC) with illegally selling crypto.

It is part of the Digital Currency Group (DCG), a conglomerate of more than 200 crypto-focused businesses.

The insolvency of Genesis is linked to the bankruptcy of FTX, which went under last November amid allegations of fraud.

Genesis had originally been set up as an "over the counter" Bitcoin trading desk, enabling the trade of large amounts of crypto.

Earlier this month, it announced it was laying off 30% of its staff, taking it down to 145 employees.

"We look forward to advancing our dialogue with DCG and our creditors' advisers as we seek to implement a path to maximise value and provide the best opportunity for our business to emerge well-positioned for the future," Genesis interim chief executive Derar Islim said in a statement.

Ripple effect

Genesis had been hit by the collapse of another crypto firm, Three Arrows Capital, which went bankrupt in June last year.

It said it was owed $1.2bn (£971m) by Three Arrows, which had been brought down by the collapse of by the collapse of cryptocurrencies Luna and TerraUSD in May.

It is the latest in a series of shocks to the sector, which has been dubbed the "crypto winter" by some analysts, describing the plummet in value of cryptocurrencies.

Ongoing fallout

Genesis is also embroiled in a high-profile dispute with Gemini, owned by the former Olympic rowers Cameron and Tyler Winklevoss, over the fate of $900m in assets that Gemini customers deposited with the lender.

The product, called Gemini Earn, was sold to investors as a chance to earn as much as 7.4% interest on their cryptocurrency holdings.

Some 340,000 Earn users have been unable to access their funds since November, when Genesis halted withdrawals because of the volatility in the crypto markets.

Last week the SEC accused both Genesis and Gemini of illegally selling crypto assets to investors. The Winklevoss twins said they were looking forward to defending the action, but DCG has so far not commented.

Cameron Winklevoss tweeted shortly after Genesis filed for bankruptcy.

The bankruptcy filing is another blow as the effects of FTX collapse are still being felt.

Founder Sam Bankman-Fried is accused of fraud after diverting funds deposited by millions of customers on his FTX platform, and transferring them without authorisation to Alameda, a hedge fund.

In December, the 30-year-old was extradited from the Bahamas, where FTX was based, back to the US where he formally pleaded not guilty to charges of defrauding customers and investors.

He was released on $250m bail, denying the allegations.


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