Cryptocurrency lending firm Genesis Global Capital has reportedly hired a restructuring adviser to explore all possible options that include, but aren’t limited to, a potential bankruptcy.
It is understood that the firm has hired investment bank Moelis & Company to explore options, while people familiar with the situation have stressed that no financial decisions have been made and that it is still possible for the company to avoid a bankruptcy filing, according to a New York Times report on Nov. 22.
Interestingly, Moelis & Company was also one of the firms engaged by Voyager Digital after it suspended withdrawals and deposits on Jul. 1 in order to explore “strategic alternatives.”
Days later, Voyager Digital filed for Chapter 11 bankruptcy in the Southern District Court of New York as part of a reorganization plan that would eventually “return value to customers.”
“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors,” said the spokesperson.
It is understood that Genesis is seeking somewhere between $500 million to $1 billion from investors to cover a shortfall that ultimately stemmed from “unprecedented market turmoil” and the fall of crypto exchange FTX.
According to a Nov. 22 Bloomberg report, the troubled lending firm has $2.8 billion in outstanding loans on its balance sheet, with around 30% of its lending made to “related parties” including its parent company Digital Currency Group along with its affiliate and lending unit, Genesis Global Trading.
A recently circulating letter from Digital Currency Group CEO Barry Silbert states that it owes $575 million to Genesis Global Capital, which is due in May 2023.
Since FTX’s collapse on Nov. 11, all eyes have turned towards Genesis, Grayscale Investments, and their parent company Digital Currency Group, with concerns the firms could be the next victims of the contagion.
All three companies have sought to quell investor fears over the last week.
Grayscale Investments reassured investors in a Nov. 17 tweet, noting that “the safety and security of the holdings underlying Grayscale digital asset products are unaffected,” referring to the withdrawal halt by Genesis Global Trading, adding its products continue to operate as normal.
In the wake of recent events, our investors should know that the safety and security of the holdings underlying Grayscale digital asset products are unaffected.— Grayscale (@Grayscale) November 16, 2022
Genesis has reiterated that its spot and derivatives trading and custody businesses “remain fully operational” despite the suspension of client withdrawals in its lending business.
Genesis’s spot and derivatives trading and custody businesses remain fully operational. We continue to support our clients who rely on us during volatile market conditions to manage their risk and execute on their business strategies.— Genesis (@GenesisTrading) November 16, 2022
Meanwhile, the latest letter to investors from Digital Currency Group CEO Barry Silbert reassured their investors that DCG is on track for $800 million in revenue in 2022.
“We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger,” he said.