Genesis Working With Moelis & Co. Mulling Over Chapter 11 Bankruptcy
According to Thursday reports, Genesis Global Markets is working with the investment bank Moelis & Company on potential solutions to its financial woes and is considering chapter 11 bankruptcy. Earlier in the same day, the also stated it is firing 30% of its employees in the second major round of layoffs within a year.
Genesis is Still Considering Bankruptcy
On November 22nd, 2022, Genesis revealed it had hired the investment bank Moelis & Company to help with its restructuring process. At the time, the CEO of the Digital Currency Group—the firm that owns Genesis Global Markets—sent a reassuring letter to shareholders predicting $800 million in revenue for his company in 2022, though it was also revealed that Genesis is not out of danger of bankruptcy.
Allegedly, bankruptcy is still very much on the table for the embattled crypto lender at the start of 2023. A company spokesperson reportedly stated that Genesis is closely working with its restructuring advisors from Moelis & Co. “to preserve client assets and move the business forward.”
Genesis was hit particularly hard by the collapse of FTX late last year. Already in mid-November, the firm halted withdrawals from its lending platform citing “extreme market dislocation”. The bankruptcy of Sam Bankman-Fried’s company was the second major hit for Genesis in 2022.
After Three Arrows Capital filed for bankruptcy, the Digital Currency Group stepped in to bail Genesis out. The move did not, however, prevent the crypto lender’s August round of layoffs that saw the departure of its CEO, and the firing of 20% of its staff. Similarly, the DCG infused $140 million into Genesis in November, the lender announced another round of layoffs in early January—this time firing 30% of its employees.
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Genesis’ Escalating Troubles
While Genesis was one of the first firms to discuss its relationship with FTX—creating a Twitter thread on the same day the cryptocurrency exchange froze customer withdrawals—and was one of the first companies to show the effects of the FTX contagion, its story hasn’t been entirely consistent. On November 8th, Genesis claimed “no material net credit exposure” to the failing exchange and hinted that it would not be notably affected by its fate.
A day later, the crypto lender announced it had suffered a total loss of “~$7M across all counterparties, including Alameda” due to the previous day’s events. Another day later, the firm finally revealed it had around $175 million stuck with FTX though it reiterated that the “circumstances surrounding FTX have not impeded the full functioning of their trading franchise”. On November 11th, FTX announced its bankruptcy, and on November 16th, Genesis announced its lending arm was halting withdrawals.
A company acutely affected by Genesis’ problems is Gemini and its Earn program. Gemini Earn froze withdrawals from its platform on the same day as Genesis. More recently, one of its co-founders, Cameron Winklevoss, published an open letter to Barry Silbert accusing him of negotiating in bad faith and evading a constructive discussion.
Do you think Genesis will ultimately find a solution that doesn’t involve filing for bankruptcy? Let us know in the comments below.