Genesis Global Capital, a cryptocurrency lending platform, is reportedly laying the groundwork for a potential bankruptcy filing as soon as this week. The company, which is a unit of Digital Currency Group (DCG), has been in confidential negotiations with various creditor groups amid a liquidity crunch. The financial pressure on DCG began to emerge after the collapse of hedge fund Three Arrows Capital. Genesis suspended withdrawals in November, soon after crypto exchange FTX, where Genesis held some of its funds, filed for bankruptcy. The failures have had ripple effects on crypto exchange Gemini Trust, run by Cameron and Tyler Winklevoss.
The company has warned that it may need to file for bankruptcy if it fails to raise cash, and talks between creditors, Genesis, and DCG have reportedly been ongoing, but have so far failed to come to an agreement. Creditor groups have exchanged several proposals with Genesis and DCG, but they have been unable to reach a final agreement. Kirkland & Ellis and Proskauer Rose have been advising groups of creditors.
The company is working towards a restructuring plan and had swapped proposals with its creditors, some of whom had suggested receiving a mix of cash and equity from DCG, according to people familiar with the talks. However, no final agreement has been reached, and it remains unclear what the final outcome will be.
In an effort to conserve cash, DCG has told shareholders that it is suspending quarterly dividends, as per a January 17th letter to shareholders seen by Bloomberg. DCG property CoinDesk, a crypto news site, confirmed in a statement to Bloomberg that it engaged Lazard as a financial adviser to explore options including a partial or full sale.
The potential bankruptcy of Genesis Global Capital would be significant due to its association with the Digital Currency Group, which is one of the largest venture capital firms in the cryptocurrency industry. The current financial troubles at Genesis Global Capital have also had a ripple effect on the wider cryptocurrency industry. The suspension of withdrawals by Genesis has led to a freeze on redemptions from Gemini Earn, a service that let Gemini’s users get yield for lending out their coins through Genesis. This has led to a decrease in liquidity for Gemini Trust.