Cryptocurrency lending ‘boss’ Genesis about to go bankrupt?

Genesis becomes the latest crypto business to struggle to stay afloat.

Cryptocurrency lending giant Genesis Global Trading has just laid off 30% of its staff and sources say it is considering filing for bankruptcy. This is the latest financial turmoil at the crypto lender.

The layoffs are not just in one department, but will spread across all departments in the company. Genesis currently has about 145 employees after this layoff.

Genesis is currently in discussions with investment bank Moelis & Co to consider future options including the potential to file for Chapter 11 bankruptcy.

A Genesis spokesperson said that the company is currently working with consultants to “maintain customer accounts and move the business forward”.

The crypto-lending company becomes the latest business to struggle to stay afloat. Last year marked the bankruptcy of many businesses in the cryptocurrency sector when the Fed raised interest rates, preventing speculative activities. Currently, the Fed is hinting about continuing to raise interest rates and investors think that the cryptocurrency sector will suffer even more pain.

Genesis has seen heavy losses on loans it provided to underperforming companies like Alameda Research and crypto hedge fund Three Arrows Capital. Both Alameda and the Three Arrows filed for bankruptcy last year.

“As we continue to face unprecedented challenges, Genesis has had to make the difficult decision to reduce its global workforce. These measures are part of our continued efforts to move the business forward.”

Last summer, Genesis cut 20% of its 260 employees and company leader Michael Moro stepped down.

Around mid-November 2022, Genesis announced it was suspending withdrawals. However, the interim CEO at the time, Derar Islim, insisted that the company was still “operating at full capacity”.

The problem began to surface after Genesis was involved in the bankruptcy of the Three Arrows Capital fund. Genesis is the largest creditor involved in this bankruptcy. Genesis said in October, before the crash of FTX that its lending dropped 80% in the third quarter.

“Genesis Global Capital – Genesis lending has had to make the difficult decision to temporarily block withdrawals and issue new loans. This decision was made in response to the market turmoil and loss of confidence in the market following the crash of FTX. This affects the lending business at Genesis and does not affect the trading and asset management business.

Genesis’s difficulties in the context of the widespread cryptocurrency crisis are still directing unwanted attention to Barry Silbert – the man who holds the “throne” of the Digital Currency Group (DCG) empire.

Silbert is a rather private person, rarely giving interviews to the press or speaking at conferences about cryptocurrencies in the industry. He founded DCG in 2015. Last year, DCG’s value reached 10 billion USD after selling 700 million, led by Softbank investors. DCG has 66 employees as of early November and has more than 200 companies in its portfolio.

DCG’s reach is huge: In addition to the lending company Genesis, they also control the asset management company Grayscale Investment, which provides the world’s largest cryptocurrency fund. DCG is also the parent company of cryptocurrency mining service provider Foundry Digital, owner of Coidesk newspaper and Luno exchange. DCG declined an interview request from Bloomberg.

In the field of cryptocurrencies, DCG is quite famous. The company’s portfolio over the years includes everything from exchanges like Coinbase to hardware maker Ledger to crypto-focused bank Silvergate.

“They have a pretty big deal in the crypto space,” said Wilfired Daye, CEO of Securitize Capital, a digital asset management firm. “They are everywhere.”

Source: WSJ