Genesis Global Holdco officially filed for bankruptcy several weeks after fellow cryptocurrency exchange FTX suddenly imploded.
The company and two subsidiaries, Genesis Global Capital and Genesis Asia Pacific, submitted bankruptcy petitions with the United States Bankruptcy Court for the Southern District of New York. Genesis Global Trading and other subsidiaries will continue 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,” Genesis Interim CEO Derar Islim remarked in a press release.
The company is considering a restructuring process that may involve a capital raise or another transaction that could permit the business to emerge under new management. “We have crafted a deliberate process and roadmap through which we believe we can reach the best solution for clients and other stakeholders,” added Paul Aronzon, an independent director at Genesis.
The company is owned by Digital Currency Group, which also holds investments in popular exchange platform Coinbase and several dozen other cryptocurrency companies. Genesis had ceased withdrawals and new loan originations two months ago; company leadership was reportedly in talks to receive an investment from cryptocurrency platform Binance.
The bankruptcy comes after reports revealed that former FTX CEO Sam Bankman-Fried had commingled funds between the exchange platform and sister trading company Alameda Research. BlockFi, a lending platform, filed for bankruptcy days after FTX was rendered insolvent, while Voyager and Celsius had already declared bankruptcy months earlier as the nascent sector endured a bear market.
Some 60% of Americans now see the risk of cryptocurrency investments as “high,” according to a survey conducted by CNBC and Momentive. Another 26% see cryptocurrencies as moderately risky, while only 10% say the assets carry “little” or no risk.
Bankman-Fried pleaded not guilty earlier this month to eight charges, which include conspiracy to commit wire fraud, conspiracy to commit securities fraud, and conspiracy to defraud the Federal Election Commission through campaign finance violations. Mark Cohen, a lawyer for Bankman-Fried who previously defended Jeffrey Epstein confidant Ghislaine Maxwell, successfully requested that U.S. District Judge Lewis Kaplan permit the sealing of the names and addresses of two unknown individuals who secured a $250 million bond for Bankman-Fried.
Coinbase announced plans last week to dismiss roughly 20% of workers for the second time in seven months. Coinbase CEO Brian Armstrong said in a message to employees that “unscrupulous actors in the industry” and the possibility of “further contagion” are presenting near-term difficulties for the company. He nevertheless said the failure of a “large competitor” and the increased “regulatory clarity” that will emerge from the collapse of FTX would produce long-term benefits for his company.
The bankruptcy of FTX has indeed spurred lawmakers to call for increased scrutiny of the cryptocurrency sector. Members of the Senate considered various proposals for more regulations on digital asset markets with Commodity Futures Trading Commission Chairman Rostin Behnam, while members of the House of Representatives discussed the bankruptcy proceedings of FTX with attorney John Ray III.