Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Bankrupt crypto lender Genesis optimistic it can resolve creditor disputes

Published 01/23/2023, 03:44 PM
Updated 01/23/2023, 07:01 PM
© Reuters. FILE PHOTO: Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are placed on PC motherboard in this illustration taken, June 29, 2021. REUTERS/Dado Ruvic/Illustration

By Dietrich Knauth

NEW YORK (Reuters) -A lawyer for the bankrupt Genesis Global Capital said on Monday that the cryptocurrency lender had some confidence it could resolve its disputes with creditors this week, with a goal of emerging from Chapter 11 by late May.

Sean O'Neal, the lawyer, spoke at an initial hearing in Manhattan bankruptcy court for Genesis Global Capital, the crypto lending business owned by Barry Silbert's venture capital firm Digital Currency Group.

Genesis and two lending units filed for bankruptcy protection from creditors on Jan. 19, two months after it froze customer withdrawals in the wake of the collapse of Sam Bankman-Fried's FTX exchange.

The filing followed the bankruptcies since last July of crypto lenders Celsius Network, Voyager Digital and BlockFi.

O'Neal said Genesis had "some measure of confidence" it would resolve its disputes with creditors this week, following about two months of negotiations, and would seek mediation if necessary.

"Sitting here right now, I don't think we're going to need a mediator," he said. "I'm very much an optimist."

Brian Rosen, a lawyer for creditors holding $1.5 billion of claims, said "we are getting closer" to an accord.

U.S. Bankruptcy Judge Sean Lane granted a series of "first-day" motions by Genesis, including to pay employees and critical vendors, which are common in bankruptcy cases.

Citing customers' privacy interests, Lane also said Genesis did not have to reveal customer names in its lists of creditors, and suggested it warn about possible phishing scams if their names were made public later.

Genesis has said it plans to sell various assets at auction, and exit bankruptcy by May 19.

The company reported just over $5 billion of assets and liabilities, and has said it owed more than 100,000 creditors at least $3.4 billion. It estimated it has nearly $1.7 billion of claims against its parent.

Genesis' bankruptcy does not include DCG, or Genesis' derivatives and spot trading, custody and brokerage businesses. DCG also controls the asset manager Grayscale and news service CoinDesk.

Genesis' problems have put Silbert into conflict with identical twins Cameron and Tyler Winklevoss, the former U.S. Olympic rowers who run the crypto exchange Gemini, which is owed $765.9 million by Genesis and is its largest creditor.

On Jan. 12, the U.S. Securities and Exchange Commission charged Genesis and Gemini with illegally selling unregistered securities through their Gemini Earn lending product.

The Winklevosses have said Genesis should repay the $900 million of assets owed to about 340,000 Earn investors, and Cameron Winklevoss has called for Silbert's removal.

Chris Marcus, a lawyer for Gemini and some other creditors, told Lane that "there is some work to do" to get everyone on the same page, but that he was "cautiously optimistic" the disputes could be resolved without a mediator.

© Reuters. FILE PHOTO: Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are placed on PC motherboard in this illustration taken, June 29, 2021. REUTERS/Dado Ruvic/Illustration

Genesis' borrowers also include hedge fund Three Arrows Capital and Alameda Research, a trading firm affiliated with FTX, a person familiar with the matter said last week.

Three Arrows and Alameda are also in bankruptcy proceedings.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.