Crypto lender Genesis Global Capital filed for Chapter 11 bankruptcy protection in New York early Friday morning, marking the latest business in the industry to file for bankruptcy as the fallout from last year's collapse in crypto prices continues to ripple through markets.
The filing estimates the firm has between $1 billion and $10 billion assets and between $1 billion and $10 billion in liabilities, with more than 100,000 estimated creditors.
A court document file later Friday showed Genesis held $5.1 billion in liabilities in the weeks following its withdrawal freeze on November 16.
The Chapter 11 filing is a long time coming for Genesis, a wholly-owned subsidiary of the Digital Currency Group (DCG), which took major losses beginning in June of last year and ultimately could no longer operate following the collapse of crypto exchange FTX.
Started in 2013, Genesis aimed to be the first all-in-one Wall Street prime broker for digital assets.
The company launched its over the counter lending business in March of 2018. By the fourth quarter of that year, the lending desk had originated $500 million in loans for the period and $1.1 billion in total.
Exactly three years later, at the height of crypto mania, the lending desk's loan originations exploded to $50 billion for the quarter and $131 billion for all of 2021.
By June of last year, that mania had begun unwinding, with crypto's total market value dropping by more than half in a matter of weeks after major crypto hedge fund — and Genesis borrower — Three Arrows Capital defaulted on $1.2 billion borrowed from Genesis.
In mid-August, Genesis' then-CEO Michael Moro stepped down as the company laid off 20% of its staff as part of a reorganization meant in part to overhaul its risk management practices.
Three months later, Genesis suspended loan redemptions and originations, with new interim CEO Derar Islim saying "abnormal withdrawal requests" following the collapse of FTX had "exceeded our current liquidity." A declaration document from Friday revealed this event amounted to a $827 million "run on the bank."
The shutdown forced crypto exchange Gemini to suspend its own lending program, Earn, which Genesis served as partner for. Some 340,000 Gemini Earn customers are now Genesis creditors.
Despite its efforts to attract additional outside capital, Genesis had no luck. Genesis laid off 30% of its staff on Jan. 5 of this year. Soon after, DCG shuttered its newer wealth management division, HQ, and more recently, suspended its shareholder dividend.
Over the first two weeks of January, Gemini co-founder and president Cameron Winklevoss refocused the company's issues with Genesis on its parent company, DCG.
In two open letters, Winklevoss claimed DCG CEO Barry Silbert had engaged in "bad faith stall tactics," and later said the executive and others misled Gemini in disclosing details of Genesis' financial health. Winklevoss also called for Silbert to step down as DCG CEO.
In response, Silbert issued a letter to DCG shareholders, which said in part: "It has been challenging to have my integrity and good intentions questioned after spending a decade pouring everything into this company."
Genesis has retained New York legal and financial firms Cleary Gottlieb Steen & Hamilton, Alvarez & Marsal, and Moelis. Kroll will serve as the restructuring administrator and publicly hosting its docket.
Along with Genesis Global Capital LLC, the filing includes affiliates Genesis Asia Pacific Pte. Ltd and Genesis Global Holdco.
The first two corporations are "100% owned by Genesis Global Holdco, LLC" and have estimated assets and liabilities between $100 million and $500 million, the filing states. Genesis Global Holdco is wholly owned by Digital Currency Group.
Genesis owes more than $3.4 billion to its top 50 largest creditors, which includes loans payable to VanEck's New Finance Income Fund ($53 million), DCG ($37.9 million), Caramila Capital Management ($21.5 million), LA-based Big Time Studios ($20 million), crypto trading outfit Cumberland ($18.7 million), as well as the Stellar Network's Development Foundation ($13 million).