To ensure Genesis is not plagued by losses, its parent company, Digital Currency Group (DCG), bail it out. But then Genesis cut its workforce by 20% to reduce costs and Michael Moro, its longtime CEO, resigned.
Genesis once again found itself on the wrong track to collapse earlier this month; when FTX filed for bankruptcy on November 11, the company lost $175 million stored with the exchange. Once again, DCG stepped in, providing a $140 million cash injection.
But despite many DCG bailouts, Genesis was unable to escape the fall of FTX. Samson Mow, a prominent crypto expert and former chief strategy officer of crypto infrastructure firm Blockstream, said the brokerage is struggling to fund the surge in numbers. customers request to exchange their cryptocurrencies. This leads to withdrawals, which risks exacerbating the ongoing crisis of confidence and increases the likelihood of a rush to other lenders (such as BlockFi or Voyager Digital)—and thus , the spread will spread.
But Mow says it’s important to understand that this is a liquidity issue, not a solvency issue. In other words, Genesis has enough assets to pay its debts, they just aren’t available in cash. For this reason, a bankruptcy “seems unlikely,” says Mow.
DCG also finds a way downplay the situation on Twitter, saying that the decision to suspend buybacks and stop issuing new loans was a “temporary action” and that the problem was limited to Genesis’ lending division, which means delivery units. Translation and custody will continue to operate as usual.
However, the situation is dire enough for Genesis to seek additional funding, with crypto exchange Binance and private equity firm Apollo Global Management. considered as potential investors.
Attempts to secure funding have been unsuccessful so far, proposal report, in part due to concerns about the financial relationship between Genesis and other entities owned by DCG. Of the $2.8 billion outstanding on Genesis’ balance sheet, about 30% is earmarked for DCG or its subsidiaries, but inter-company loans are now in particular doubt because of their role. their central role in the demise of FTX.
Barry Silbert, CEO of DCG, told investors that loans between companies of this kind are not unusual. “We have weathered previous crypto winters and while this winter may be more severe, together we will get through it stronger.”
For all his conviction, however, Silbert’s rallying call didn’t stop speculation. Recently burned by false assurances from FTX founder Sam Bankman-Fried — who tweeted “FTX is fine” on November 7, just days before the company collapsed — money investors electronics is also preparing for the bankruptcy of Genesis.
One of the consequences of the potential collapse happened. After withdrawals were halted, crypto exchange Gemini, whose yield farming product sits on top of Genesis, announced that its Earn customers will no longer be able to access their funds. .
On November 22, the exchange explain it’s working to “find a solution”, but until then, $700 million in customer money will remain locked. If Genesis goes bankrupt, some of these funds may never be returned, as at FTX—and it is possible that customers of other Genesis-affiliated exchanges will suffer the same fate.
