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Genesis Global Capital's Fall From Grace: Bankruptcy Filing & Billions in Liabilities

Genesis' lending unit has gone bust, with the company listing over 100,000 creditors and aggregate liabilities ranging from US$1.2 billion to US$11 billion. All eyes on the crypto market now.

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Crypto lender Genesis Global Capital has filed for US bankruptcy, joining a slew of crypto companies that have collapsed in recent months as a result of plunging prices and the implosion of some of the industry's key players.

In a bankruptcy filing on Friday morning, Genesis listed over 100,000 creditors, with aggregate liabilities ranging from US$1.2 billion to US$11 billion, according to court documents. However, it also stated that the company's other subsidiaries involved in the derivatives and spot trading and custody businesses, as well as Genesis Global Trading, are not included in the filing and will continue client trading operations.

“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Genesis interim CEO Derar Islim.

“We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution," Islim added.

Genesis is a part of Digital Currency Group (DCG), led by Barry Silbert, who has seen mounting problems in recent months.

Related: Genesis Trims Workforce By 30% in New Layoff Round

Genesis halted withdrawals in November, citing heavy exposure to 3AC and FTX. Earlier this month, it laid off almost a third of its workforce, which now stands at 145 employees, while parent company DCG shut down its wealth management business.

The firm has also been embroiled in a dispute with crypto exchange Gemini. It owes users of the Gemini Earn program some US$900 million, something that Cameron Winklevoss, co-founder of Gemini, has been eager to remind the public.

Earlier this month, Winklevoss wrote an open letter earlier this week to Barry Silbert, chief executive of DCG, Genesis's parent company, accusing him of “bad faith stalling tactics,” claiming that DCG owes Gemini a total of US$1.675 billion. Winklevoss has also publicly demanded the removal of Silbert from his position as DCG CEO.

What next?

BTC experienced a minor slip up on Thursday, after it was first reported that Genesis was on the brink of bankruptcy. The world's largest cryptocurrency is now trading just below US$21,000, falling 0.5% in the past hour since news of Genesis' bankruptcy broke out.

"Genesis has been in trouble since the end of last year and most of the negative news should be priced in," said Oanda's Edward Moya in a note on Thursday, prior to today's developments.

With Chapter 11, Genesis will be given an automatic moratorium, meaning that creditors cannot enforce debt claims or enforce rights against any security or collateral without the permission of the courts. This means that creditors such as users of the Gemini Earn program will have to extend their wait for the recovery of their funds.