Genesis Crypto Lender Announces Bankruptcy Filing
Introduction to Crypto
Since Bitcoin (BTC) was released in 2008, the cryptocurrency market has been an unpredictable wild west plagued by frequent market crashes.
Bitcoin, the most popular cryptocurrency in circulation today, is largely blamed for triggering recent market crashes. In 2011, the price of Bitcoin fell from $32 to $0.01 when the largest cryptocurrency exchange, Mt.
Gox, disclosed a security breach that resulted in the loss of 850,000 BTC. After the Bitcoin exchange, Mt. Gox temporarily halted withdrawals in 2014 and financial authorities in the United States began to doubt Bitcoin and looked to initiate regulation, the price of Bitcoin plummeted from $1,000 to $170 in only two years.
1. Genesis Trading filed for bankruptcy after suffering massive losses as a result of the collapse of FTX and the hedge fund Three Arrows Capital.
2. Genesis is a part of Digital Currency Group, a company run by Barry Silbert that has been having a lot of trouble over the last several months.
3. The stablecoin USD Coin is managed by Circle, one of Genesis' most important customers. Gemini, another of Genesis' main clients, has the backing of the Winklevoss twins, who are also investors in the company.
The Crypto Contagion
Genesis was a lender that gave money to crypto hedge funds and other OTC businesses, but a series of bad bets cost it a lot of money last year, and on November 16, it had to stop withdrawals.
Sam Bankman-Alameda Fried's Research hedge fund and his FTX exchange both got cryptocurrency loans from Three Arrows Capital (3AC), which is based in New York. In July, right in the middle of the "crypto winter," the cryptocurrency exchange 3AC went out of business. Court documents show that Genesis gave 3AC a loan of more than $2.3 billion worth of assets.
In the meantime, Alameda was a big reason why FTX went out of business. Even though Bankman-Fried has said many times that he doesn't know of any fraud in his network of businesses, he hasn't been able to give a good reason for the million-dollar shortfall. Because Genesis's finances have been getting worse, people are paying more attention to Silbert's bigger DCG operation. After 3AC went bankrupt, the parent company had to pay the $1 billion debt that Genesis owed.
DCG was one of the first companies to start making publicly traded trusts, which let investors own bitcoin and other cryptocurrencies without taking on the market risk that comes with it. The Grayscale Bitcoin Trust is a place to put money (GBT) Compared to last year, the discount to the net asset value of the conglomerate has grown.
Consequences of FTX's Collapse
When FTX went down in November and froze the market, cryptocurrency investors everywhere rushed to find a way out. When FTX failed, it is said that Genesis tried to find interested partners to get a $1 billion emergency bailout but was unable to.
CoinDesk says that parent company DCG has stopped making payments as of this week because it owes creditors more than $3 billion.
Claims by the Securities and Exchange Commission
The Securities and Exchange Commission went after Genesis Global Capital and the cryptocurrency exchange Gemini last week because they were selling unregistered securities through a popular scheme that promised high interest rates on cryptocurrency deposits.
The Securities and Exchange Commission's move is part of a larger effort by several U.S. government agencies to crack down on cryptocurrencies. The sharp drop in cryptocurrency prices over the past year made it possible for most investors to lose billions of dollars, which made the government take action.
As part of its plan to reorganize, Genesis will set up a trust that will handle how assets are given to creditors.
The plan has two parts. One is to sell the company outright. The other is to raise money or do something else that would allow it to keep running under new management. The New York- based company will start to market and sell Genesis Global Holdco's assets to turn them into cash.
It will use the money from this sale to pay off the company's debts. Creditors will be given shares in the reorganized Genesis Global Holdco if the process does not lead to the sale of the company or the financing of more funds.