Genesis Files For Chapter 11 Bankruptcy, Owes More Than $3.5 Billion To Creditors

The company’s bankruptcy filing leaves many wondering how much more bad news is in store for investors. The future of GBTC remains unknown, but some activists are taking matters into their own hands.

Relevant Past Articles:

• The Contagion Continues: Major Crypto Lender Genesis Is Next On The Chopping Block

• Digital Currency Group Breaks Silence As Market Hangs In The Balance

• The Crypto Contagion Intensifies: Who Else Is Swimming Naked?

• Counterparty Risk Happens Fast

• 3AC And The Leaning Tower Of Babel

• Three Arrows Capital Faces Liquidation

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Genesis Files For Chapter 11 Bankruptcy

Barry Silbert @BarrySilbert

There is a daisy chain of borrowers and lenders in the crypto space -- most well capitalized, but some are not Lots of leverage still in the ecosystem...including in some non-obvious places Important to understand counterparty risk and where are the weak links in the chain

 After a year full of infamous liquidations and high-profile bankruptcies, it was reported in November that Genesis Global was looking for a $1 billion liquidity injection to keep the company afloat. 

Today, the company filed for Chapter 11 bankruptcy protection, owing over $3.5 billion to 100,000-plus creditors. As expected, Gemini is the largest creditor with an unsecured claim of $765.9 million. Other notable creditors include Mirana Ventures (the investment arm behind Bybit), MoonAlpha (the team behind Babel Finance) and VanEck’s New Finance Income Fund. 

VanEck’s New Finance Income Fund is one example of an institutional product that was created to capture short-term lending, which was a high-yield opportunity in the digital asset and crypto space. In July 2022, they announced a $35 million commitment from the Fairfax County pension plan, showing that it’s not just larger institutions that took high-risk, speculative bets on an arbitrage play that are now owed money, but also everyday retail market participants and pension funds that were involved in this game. 

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Following Gemini, we don’t know who holds the next few largest unsecured claims for $462 million and $230 million. 

Source: Genesis Bankruptcy Protection Filing 

Source: alphaketchum Twitter

Filing for Chapter 11 bankruptcy is only the beginning of a full resolution. Genesis is owned by Digital Currency Group (DCG) and the two companies’ finances are closely intertwined. We have written about this relationship in more detail in “Digital Currency Group Breaks Silence As Market Hangs In The Balance.” 

Cameron Winklevoss says he is “preparing to take direct legal action against Barry and DCG” unless DCG offers a fair deal to creditors and Gemini Earn users. This likely will be only of many pending legal actions and lawsuits coming down the pipe for the DCG enterprise. 

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The rest of this article is open to paying members only. Here’s what’s behind the paywall 🔏:

• Potential ripple effects of the Genesis bankruptcy filing. 🌊

• The big questions surrounding DCG and Genesis. ❓❓

• What investors should look to for clues about potential developments in the GBTC saga. 🔎

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