Genesis Faces Potential Bankruptcy Without Adequate Funding, Bloomberg

According to Bloomberg, people with knowledge of the matter say that digital-asset brokerage Genesis is having a tough time raising cash for its lending division and has warned potential investors that it might have to file for bankruptcy if it doesn’t succeed.

Since FTX filed for bankruptcy earlier this month, the firm has been fighting to stay afloat and unsuccessfully attempted to raise at least $1 billion from Binance, Bloomberg reported.

Meanwhile, people familiar with the situation told The Block that Genesis is having difficulties securing emergency funds and that its fundraising target has been reduced from $1 billion to $500 million.

Additionally, it was mentioned that Digital Currency Group (DCG), which is also the parent company of crypto news outlet CoinDesk, is not planning to sell any parts of its venture portfolio and Grayscale, a significant money-maker for the investment company. The Block notes that DCG is currently working with bankers from Ducerne Partners LLC.

Bloomberg also reported that Genesis issued a statement saying the company has no plans to declare bankruptcy “imminently,” and is instead working to find a resolution for the current crisis.

Last week, Genesis Global Capital, the lending business of Genesis Trading, stopped accepting new loan applications and temporarily suspended redemptions following what DCG described as “extreme market dislocation and loss of industry confidence caused by the FTX implosion.”

At the time of the announcement, DCG said that its other wholly owned subsidiaries were not affected.

“This decision impacts the lending business at Genesis and does not affect Genesis’s trading or custody businesses. Importantly, this decision has no impact on the business operations of DCG and our other wholly owned subsidiaries,” DCG’s VP of communications and marketing was quoted as saying.

Last week, Genesis disclosed that its derivatives unit had $175 million worth of locked funds in its FTX trading account. In response, DCG decided to pump $140 million into Genesis’ equity.

After FTX’s shocking collapse and subsequent bankruptcy, Genesis had requested an emergency loan of $1 billion from investors, but it was unsuccessful, according to a Nov. 17 WSJ report.

Earlier this year, Genesis was dealt a blow by the implosion of Three Arrows Capital (3AC), a Singapore-based crypto hedge fund that filed for bankruptcy at the end of June. According to court documents, 3AC had borrowed $2.4 billion from Genesis Asia Pacific before going bankrupt. DCG has a $1.2 billion claim against the bankrupt hedge fund.

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