Genesis, one of the largest crypto lending firms in the space finally filed for Chapter 11 bankruptcy on Friday. Though Genesis managed to cling on to life for months longer than some of its largest competitors, recent market shake-ups and festering fallout from FTX’s collapse flung it over the edge. Now, the firm will join Celsius, Voyager Digital, and BlockFi in a graveyard of former crypto giants.
Genesis was among the crypto firms offering sky high returns on cryptocurrency investments. The company lent funds to some of the shadiest names in the space, including failed crypto hedge fund Three Arrows Capital and FTX affiliate Alameda Research. In the latter example, Genesis reportedly gave out hundreds of million worth of unsecured loans to Alameda. Genesis’ parent company, DCG, now reportedly owes creditors around $US3 ($4.31) billion, according to CNBC. The bankruptcy filing comes just a week after the Securities and Exchange Commission charged Genesis with allegedly selling unregistered securities.
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” Genesis Interim CEO Derar Islim said in a statement.
Genesis did not immediately respond to Gizmodo’s request for comment.
The real cracks in Genesis’ armour began to show last November when, like so many others before it, the company announced it would halt withdrawals and new loan originations on its platform. At the time, Genesis said the mad rush to withdraw crypto following the FTX collapse, “created unprecedented market turmoil, resulting in abnormal withdrawal requests.” The situation only got worse from there. Around two months after pausing withdrawals, Genesis Global Trading Inc announced it would layoff around 30% of its workforce. That second round of layoffs came less than a year after a previous round where the company axed 20% of its workforce.
While Genesis, like just about every other company in the crypto space, struggled to adapt to worsening cryptocurrency valuations and diminished consumer trust, the public response to FTX’s implosion likely accelerated the company’ downfall. FTX’s death spiral sparked a new wave of crypto customers sprinting to withdraw their funds. Genesis reportedly sought out a $US1 ($1.44) billion bailout during this time to stop the bleeding but nobody answered the company’s call.