The lending unit of crypto firm Genesis, Genesis Global Capital, has filed for bankruptcy protection in the United States, owing creditors at least $3.4 billion. The filing comes after the crypto lender froze customer redemptions on November 16th, following the collapse of major exchange FTX which sent shockwaves through the crypto sector.
The bankruptcy filing is the latest crypto failure triggered by a market collapse that wiped about $1.3 trillion off the value of crypto tokens last year. The highly interconnected sector has continued to be affected by the market collapse, even as bitcoin has rallied so far in 2023.
Ivan Kachkovski, currency and crypto strategist at UBS, said that the bankruptcy “doesn’t come as a shock to the markets” and that “It remains to be seen if the chain effect would go on.”
The company’s filing with the U.S. Bankruptcy Court for the Southern District of New York estimated that it had more than 100,000 creditors and that its assets were worth $5.3 billion and debts, including intercompany liabilities, were worth $5.1 billion as of November 30th.
Genesis has outlined a plan to exit the bankruptcy by May 19th, according to court filings. It will try to sell its assets at an auction within three months to repay creditors, the filings say. Genesis Global Holdco, the parent of Genesis Global Capital, and another lending unit Genesis Asia Pacific have also filed for bankruptcy protection.
Genesis Global Holdco said in a statement that it would contemplate a potential sale or stock-related transaction, to pay creditors and that it had $150 million in cash to support the restructuring. It added that Genesis’ derivatives and spot trading, broker-dealer, and custody businesses were not part of the bankruptcy process, and would continue their client trading operations.
Genesis’ owner, Digital Currency Group (DCG), said in a statement that neither DCG nor its employees, including those sitting on the Genesis board, were involved in the decision to file for bankruptcy.