Genesis had been preparing for bankruptcy for quite some time. Now it’s official. Genesis is out of business. Some of the firm’s creditors had proposed a restructuring plan in which the company would receive a combination of cash and shares from DCG in the past. That is now, however, irrelevant.
Genesis as another victim of crypto winter
Genesis is a cryptocurrency platform owned by Digital Currency Group (DCG), which also owns CoinDesk, Foundry, Grayscale Investments, and Luno besides Genesis. The company is known for providing different kinds of services, including crypto trading, lending, or asset custody. Now it is entering bankruptcy.
The company was doing very well until the whole crypto market came crashing down in 2022 while having exposure to other crypto firms that went bust. This includes Three Arrows Capital (3AC), which received a $2.36 billion loan from Genesis according to The Block. However, 3AC filed for bankruptcy in June, leaving Genesis in trouble.
It was later revealed that the debt is undercollateralized and that Genesis initiated arbitration procedures against 3AC in New York’s American Arbitration Association (AAA) to recoup part of its loans.
How it all started?
It all began with a dangerously fast-rising inflation in 2021. That’s when the sentiment shifted and central banks announced the change in their policy. Their primary goal is to bring inflation down with high interest rates. These increasing interest rates brought the prices of risk-on assets like cryptocurrencies and stocks lower.
Then the cascade effect started to take place, drawing prominent companies underwater one by one. The first notable company to go underwater was Terra Luna, then 3AC, FTX, and many other firms followed. As the bankruptcies of these large crypto companies caused several market crashes, Genesis could draw the market down as well.
According to Financial Times (FT), Genesis’ owner DCG was trying to raise money by selling assets from its venture portfolio because Genesis owes creditors more than $3 billion. There are approximately 200 cryptocurrency-related projects in the firm’s venture capital portfolio, which could be sold off.