Genesis Is Preparing to File for Bankruptcy as Crypto Contagion Continues

Cryptocurrency lender Genesis Global Capital reportedly could file for bankruptcy this week.

Bloomberg reported Wednesday (Jan. 18) that the unit of Digital Currency Group (DCG) has been negotiating with creditor groups amidst a liquidity crunch.

The plans could change, as the talks are continuing, the report said, citing unnamed sources.

Genesis did not immediately reply to PYMNTS’ request for comment.

It was reported Jan. 5 that Genesis was considering filing for bankruptcy and had laid off 30% of its staff across departments.

A Genesis spokesperson told PYMNTS at the time via email: “As we continue to navigate unprecedented industry challenges, Genesis has made the difficult decision to reduce our headcount globally. These measures are part of our ongoing efforts to move our business forward.”

That report came a day after Genesis Global Capital Interim CEO Derar Islim said in a letter to clients that the firm needs more time to fix its borrowing and lending intermediation business, that its derivatives and spot trading businesses remain fully operational and that the company continues to refine its business plans.

On Thursday (Jan. 12) both Genesis and Gemini Trust Company were charged by the Securities and Exchange Commission (SEC) with offering unregistered securities.

The complaint centered on the Gemini Earn program through which the two companies drew hundreds of thousands of investors who weren’t provided necessary information and raised billions of dollars’ worth of crypto assets, the SEC said at the time.

“Today’s charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws,” SEC Chair Gary Gensler said.

In addition to facing these charges, Genesis owes $900 million to Gemini. Genesis was the main partner in the Earn program, in which retailer investors were to lend out cryptocurrency and get a fixed stream of returns.

Gemini halted withdrawals from the program in November after Genesis said “unprecedented market turmoil” meant it lacked the liquidity to cover its redemption requests.

Genesis’ troubles are part of an ongoing avalanche of crypto-universe problems stemming from the implosion of Sam Bankman-Fried’s crypto exchange FTX.