Genesis, the cryptocurrency lending platform owned by high-profile venture fund Digital Currency Group (DGC), has officially filed for Chapter 11 bankruptcy protection after months of speculation.
Under Chapter 11, the company is entitled to remain in business while a plan to repay its approximately US$3.5bn of liabilities is meted out through the courts.
“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 interim chief executive officer Derar Islim in a press release.
According to the statement, Genesis has more than US$150mln in cash on hand which will “provide ample liquidity to support its ongoing business operations and facilitate the restructuring process”.
Genesis first warned investors of a possible collapse in November 2022, when the firm sought US$1bn in funding to keep the ship afloat.
The group’s financial woes became more apparent when Gemini, the digital asset exchange established by entrepreneurs Cameron and Tyler Winklevoss, demanded US$900mln in unpaid liabilities from Genesis.
Gemini had partnered with Genesis for the former’s Earn programme, which gave retail investors the opportunity to earn yield by lending their digital assets to borrowers.
In the wake of the FTX collapse, Genesis implemented a freeze on Earn customers’ withdrawals which remained in effect until Thursday’s Chapter 11.
Customers’ funds will now remain in limbo, potentially for years, while a restructuring plan is negotiated.
Cameron Winklevoss, the more outspoken of the twins, had previously accused Genesis and DCG chief Barry Silbert of making “carefully crafted lies… in an effort to mislead lenders” while also threatening legal action.
Despite the Chapter 11 filing, Winklevoss has yet to hit the brakes on his litigious rhetoric.
Although Winklevoss agreed that Chapter 11 “is a crucial step towards us being able to recover (Earn customers’) assets, he also warned that “the decision to put Genesis into bankruptcy does not insulate Barry, DCG, and any other wrongdoers from accountability”.
8/ We also believe that — in addition to owing creditors all of their money back — Genesis, DCG, and Barry owes them an explanation. Bankruptcy court provides a much-needed forum for that to happen. Sunlight is the best disinfectant.— Cameron Winklevoss (@cameron) January 20, 2023
“Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently.”
Bitcoin and the wider cryptocurrency sector have shrugged off the latest high-profile crypto collapse, suggesting that the bankruptcy was already priced into the markets.