The storm continues! Genesis, one of the largest lenders of cryptocurrencies, filed for bankruptcy

Genesis Global Holdco LLC, one of the largest lenders in the cryptocurrency market, filed for bankruptcy protection in the United States this week, along with its lending subsidiaries, Genesis Global Capital LLC and Genesis Asia Pacific Pte.

Genesis's subsidiaries responsible for derivatives, spot trading and custody, as well as cryptocurrency broker Genesis Global Trading, are no longer protected from bankruptcy and can conduct customer trading operations as usual.

For cryptocurrency participants, the "Genesis bankruptcy rumors" that have been boiling over the past few months have finally settled, and Genesis has become the latest victim of turmoil in the digital asset industry since the collapse of FTX, the world's second most traded digital currency exchange.

Genesis' biggest clients include Circle, the blockchain giant that operates the stablecoin USD Coin, and Gemini, a cryptocurrency exchange founded by the Winklevoss brothers, who have sued Xiaoza for plagiarizing his campus social networking ideas.

Genesis listed more than 100,000 creditors in its bankruptcy filing, with total liabilities ranging from $1.2 billion to $11 billion, and the top 50 unsecured claims totaling about $3.4 billion, according to court filings. Currently, Genesis has $150 million in cash on hand.

At the same time, Genesis claims that the Gemini exchange also owes $765.9 million in loans due, similar to "WeChat Change", a $78 million loan due from Donut, which enables high-yield management of idle funds through decentralized finance, and $53.1 million from a fund issued by asset management giant VanEck.

Previously, according to media reports, Genesis owed more than $3 billion to creditors, including $900 million stuck on its platform and belonging to Gemini exchange customers, and 280 million euros owed to Dutch cryptocurrency exchange Bitvavo. Genesis must also immediately repay a $350 million loan to Genesis' parent company from Chelsea football club owner Todd Boehly's investment group.

After Genesis filed for bankruptcy, Gemini co-founder Cameron Winklevoss tweeted that Genesis' parent company, Digital Currency Group, and its CEO Barry Silbert "continue to refuse to offer fair deals to creditors" and do not rule out immediate legal action against Digital Currency Group and related persons.

Just days before Genesis' bankruptcy, the SEC filed a lawsuit against Genesis and Gemini's "retail investors lend cryptocurrencies for high-yield returns" program, citing unregistered securities offerings and sales.

According to people familiar with the matter, after the currency hedge fund Three Arrows Capital was forced into bankruptcy liquidation last summer, Genesis laid off 20% of its 260 employees, and then-CEO Michael Moro resigned. Genesis allegedly provided a $2.4 billion loan to Three Arrows Capital, with only 50% coverage of the collateral.

FTX went bankrupt last November, and Genesis had lent at least hundreds of millions of dollars to the former's sister trading firm, Alameda Research. Genesis suspended loan disbursements and redemptions since November 16 last year, leaving $900 million belonging to Gemini customer funds unable to be drawn. In early January, Genesis laid off another 30 percent of its workforce, leaving about 145 employees to stay.

Genesis' parent company, Digital Currency Group, is also experiencing liquidity crunch, and it also operates crypto asset manager Grayscale Investments, cryptocurrency media CoinDesk, mining and staking company Foundry, cryptocurrency exchange Luno, data platform TradeBlock, and wealth managers HQ and DCG Real Estate.

Digital currency group CEO Barry Silbert revealed last week that the parent company owes Genesis $447.5 million and 4,550 bitcoins worth about $78 million, and that the parent company will suspend quarterly dividend payments to preserve cash. Grayscale Bitcoin Trust, the world's largest cryptocurrency fund issued by its asset management company, has been trading below the value of its crypto assets.

Meanwhile, CoinDesk, a subsidiary of the digital currency group, is exploring selling all or part of its shares in recent months, mainly with the aim of alleviating the parent company's financial crisis. After the FTX crash, Genesis sought a $1 billion bailout, but could not find an interested counterparty, and the parent company had to take over. Genesis has also raised money from Binance and private equity giant Apollo Global Management.

According to public information, the digital currency group was founded in 2015 and was supported by well-known investors such as Japan's SoftBank, Singapore's government investment company GIC, and Google's venture capital arm CapitalG, and once listed former US Treasury Secretary Summers and private equity giant Glenn Hutchins, co-founder of private equity giant Silver Lake Capital, as senior advisers, both of whom have recently resigned.

Mainstream cryptocurrencies mostly rose on Friday, January 20, with Bitcoin, the largest market capitalization, rising more than 1% to $21,200, hovering at a two-month high, and is up nearly 30% this year, compared to last year's 64% plunge. However, since its peak in 2021, the total market capitalization of the cryptocurrency circle has shrunk by about $2 trillion, making it difficult for many cryptocurrency lending institutions to sell off.