According to documents signed by interim CEO Derar Islim, the crypto lending firm Genesis had $5.1 billion in outstanding debts in the weeks after it halted withdrawals in November.
On the first day of proceedings in the U.S. Bankruptcy Court for the Southern District of New York, Islim presented a summary of Genesis’ financial state prior to its restructuring. This comes as Genesis joins the list of crypto companies affected by the sudden collapse of FTX. Given that, three of its divisions were impacted –
- Genesis Hold Co,
- Genesis Global Capital LLC, and
- Genesis Asia Pacific PTE.
What was the reason behind $5 billion Debt of Genesis
The liquidity crisis that began several months prior was caused by Genesis’s $1.2 billion loss to the crypto hedge fund Three Arrows Capital (3AC), which collapsed in the summer of 2022. This loss was a result of the Genesis Asia Pacific unit (which also filed for bankruptcy), which was responsible for managing Genesis’s loan relationship with 3AC. Moreover, according to the statement, Genesis had $2.4 billion in unpaid loans to the fund at the time of 3AC’s failure, of which only half could be repaid.
In the previous year, Digital Currency Group (DCG) accepted a considerable amount of risk by trading a 10-year promissory note in exchange for Genesis’s $1.2 billion in claims against Three Arrows Capital (3AC). This note is currently the focus of the public dispute between DCG and the cryptocurrency exchange Gemini regarding Gemini’s yield product Earn, with Gemini being Genesis’s largest creditor, with a debt of more than $700 million.
The Winklevosses are trying to claim that they acted ethically when they created Gemini earn, a loan program dressed up to look like an interest-bearing account, and then invested it with a company (Genesis) that was clearly cooked for months before they shut withdrawals. Scum.
— Ed Zitron (@edzitron) January 21, 2023