The shocks caused by the cryptocurrency crash and the FTX market crash continue.
The latest victim has been Genesis, a cryptocurrency firm that the United States Securities and Exchange Commission (SEC) had recently accused of irregular practices and that already froze the withdrawal of client funds last November.
This Friday has made the forecasts good and has declared bankruptcy.
It is the last domino to fall in the sector.
Genesis has announced through a statement that several group companies, those dedicated to the loan business, are filing for US bankruptcy legislation to begin a debt restructuring process.
Genesis subsidiaries engaged in derivatives and spot trading and custody businesses continue to operate, according to the company.
The firm ensures that it has proposed a road map to get out of the crisis that includes the creation of a fund that will distribute the assets to creditors.
The plan contemplates a two-way process in search of a sale or a capital increase (with the possibility of converting debt into shares).
The company will begin a process to sell its assets, and will use the funds "to pay creditors fairly and equitably."
In parallel, it will look for a sale of the company or the achievement of new capital.
If it fails, the creditors will receive ownership stakes in the reorganized firm.
All aspects of the restructuring process will be overseen by a special committee independent of the company's board of directors.
In any case, the prospects are not good for clients and creditors, given the situation in which the cryptocurrency market finds itself and the accusations that the company is facing.
Last week, the SEC filed charges against Genesis (and Gemini, the cryptocurrency exchange founded by the Winklevoss twins) for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.
Genesis and Gemini captured billions of dollars worth of crypto assets from hundreds of thousands of investors, the SEC said.
Genesis took cryptocurrency deposits from investors to whom it offered high returns, but with the collapse of bitcoin and other cryptocurrencies, problems began.
Other firms with a similar business model such as Celsius Network and Votager Digital suspended payments in the middle of last year.
In November 2022, shortly after the bankruptcy of FTX, the exchange founded by Sam Bankman-Fried, Genesis announced that it would not allow investors in its Gemini Earn program to withdraw its crypto assets because it lacked sufficient liquidity to meet withdrawal requests after the volatility of the market.
At the time, Genesis had approximately $900 million in investor assets from 340,000 Gemini Earn investors, according to the SEC.
Retail investors have not yet been able to withdraw their crypto assets.
In the documentation presented to the court that will supervise the bankruptcy, Genesis Global Capital, one of the companies, ensures that it has more than 100,000 creditors (the highest box that allows you to mark the form) and a number of assets and liabilities between 1,000 and 10,000 million dollars.
Two other group companies that have suspended payments have liabilities of between 100 and 500 million dollars.
The company's main creditor is Gemini, the firm of the Winklevoss twins, with 765 million dollars, which has accused Genesis of falsifying its accounts and withholding its funds.
The list of the main 50 creditors amounts to about 3,350 million dollars.
Genesis now ensures that it has more than 150 million dollars in cash, a liquidity that it hopes will help it to face the restructuring process.
The firm is a subsidiary of Digital Currency Group, the crypto asset conglomerate founded by Barry Silbert in 2015.
“While we have made significant progress refining our business plans to remedy liquidity problems caused by recent extraordinary challenges in our industry, including the Three Arrows Capital default and the FTX bankruptcy, a judicial restructuring presents the most effective in preserving assets and creating the best possible outcome for all Genesis stakeholders," Derar Islim, Genesis' interim CEO, who was appointed in August last year, said in the statement.
"We deeply appreciate our clients' patience and cooperation as we work to achieve an equitable solution," he added.