Genesis Bankruptcy Filing Imminent as Creditor Negotiations Stall: Reports

Crypto lender Genesis, an entirely owned subsidiary of Digital Currency Group (DCG), is on the verge of filing bankruptcy after negotiations between the troubled firm and creditors have did not move forward, in response to multiple reports.

Bloomberg, which cites sources near the situation, reported today that Genesis is preparing to file for bankruptcy protection as soon as this week. Genesis first warned of such a move in November after it suspended client withdrawals following the collapse of cryptocurrency exchange FTX.

Genesis and parent company DCG have been unsuccessful in reaching an agreement with creditors despite offering several proposals, in response to Bloomberg.

DCG Mulls Enterprise Portfolio Sale to Shore up $3B Genesis Shortfall: Report

The Block also reported today that Genesis and its creditors are negotiating a Chapter 11 bankruptcy plan. As a part of the proposed deal, creditors would conform to a forbearance period of between one and two years on payments, and receive money and equity from DCG as a part of the agreement, The Block reported, citing unnamed sources.

Neither Genesis nor DCG immediately responded to Decrypt‘s request for comment.

FTX’s downfall left holes within the balance sheets of many other crypto industry firms, yielding a contagion that has spread since early November. Genesis said in November that it had $175 million value of cryptocurrency locked up in FTX, which is currently undergoing its own Chapter 11 bankruptcy process. Overall, nonetheless, Genesis has a $3 billion shortfall, in response to the Financial Times.

Crypto exchange Gemini claims that Genesis holds greater than $900 million value of customer funds from its Gemini Earn program, which lets users earn interest in deposited assets. Gemini Earn users have been unable to access those funds since Genesis shuttered withdrawals.

That has led to a public disagreement between Gemini co-founders Tyler and Cameron Winklevoss and DCG founder and CEO Barry Silbert, which has intensified in recent weeks because the Winklevoss brothers demanded Silbert’s resignation. The general public spat followed several weeks of negotiations between the firms and creditors.

From ‘Bitcoin Billionaires’ to SEC Charges: A Temporary Crypto History of the Winklevoss Twins

Last week, the US Securities and Exchange Commission charged each Genesis and Gemini with offering unregistered securities in relation to Gemini Earn.

On January 4, Genesis Interim CEO Derar Islim said that the firm needed additional time to attempt to find an answer to its liquidity crisis. The next day, Genesis cut 30% of its staff to cut back costs and stabilize the corporate amid the crisis.

DCG is considering selling assets from its enterprise portfolio, which incorporates stakes in greater than 200 crypto projects—resembling crypto exchange Coinbase and USD stablecoin issuer Circle—to cover the Genesis shortfall, the Financial Times reported last week.

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