Genesis is Reportedly Preparing to File for Bankruptcy within Days

Troubled crypto lender Genesis Global Trading, which has halted withdrawals, is in the final stages of preparation to file for Chapter 11 bankruptcy, according to multiple media reports. Anonymous insiders have revealed that the company might confirm the bankruptcy filings within the week if it fails to raise any cash.

Genesis Prepares to File for Bankruptcy

Genesis, a subsidiary of Digital Currency Group (DCG), is reportedly negotiating with creditors' confidentiality. However, the parties failed to reach any settlement despite multiple proposals.

The troubles at Genesis started with the collapse of the crypto-centric hedge fund Three Arrows Capital last year, to which the crypto lending firm loaned $2.4 billion; all of which went bust. The lending company received the final blow with the collapse of FTX last November.

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Is Genesis Going to Be the Latest Crypto Firm to Collapse?

Genesis halted all withdrawals due to a liquidity crunch in November that directly impacted the users of Winklevoss' Gemini Earn. Genesis and Gemini had an agreement under which Gemini marketed crypto-lending products on behalf of Genesis for a commission.

Last week, the US Securities and Exchange Commission (SEC) charged Gemini and Genesis for offering and selling unregistered securities with crypto lending products. A civil class-action lawsuit filed earlier also alleged Gemini Earn products to be unregistered securities and accused the companies of bypassing mandatory disclosures.

Meanwhile, Genesis and Gemini are feuding over a debt of $900 million. Cameron Winklevoss, the Co-Founder of the crypto exchange Gemini, accused the CEO of Digital Currency Group, Barry Silbert, of acting out using "bad faith stall tactics" to resolve the payment.

The debts came from the Earn users with the lending products. When Genesis halted the withdrawals, there were 340,000 customers of the Earn Product, with assets of around $900 million. Now, if the company files for bankruptcy, these customers have to wait for lengthy proceedings to receive their proceeds.