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Crypto lender Genesis files for bankruptcy as crisis spreads

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Cryptocurrency lender Genesis Global Holdco filed for bankruptcy, the latest firm to collapse in the aftermath of FTX’s swift downfall.

The company filed for Chapter 11 protection on Thursday in the Southern District of New York, court documents show. It said in a statement that it plans to use the court process to try to sell assets or raise money. If that process is unsuccessful, creditors will own the reorganised business.

The company said it would use its $150 million of cash on hand to fund itself in bankruptcy. Chapter 11 filings allow a firm to continue operating while working out a plan to repay creditors.

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Parent company Digital Currency Group had been in confidential negotiations with various creditor groups amid a liquidity crunch, and Genesis had warned that it may need to file for bankruptcy if it fails to raise cash, Bloomberg News previously reported.

Genesis Global Trading and other units involved in trading and custody aren’t part of the bankruptcy filing.

Financial pressure at Barry Silbert’s DCG began to emerge following 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.

Redemptions and loan originations at the company remain suspended and claims will be handled in bankruptcy court, according to the statement.

In January, Genesis laid off roughly 30% of its staff in the latest round of job cuts. Interim Chief Derar Islim earlier sent a letter to clients saying it needed “additional time” to come up with a solution for a liquidity crunch at the lending unit.

Digital-asset prices weakened a little as crypto markets absorbed the the developments. Bitcoin was little changed at $21,000 as of 2:07 p.m. in Tokyo after earlier advancing as much as 1.3%. The token is up 28% for 2023 so far, paring some of last year’s deep rout.

© 2023 Bloomberg

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