Summary

• Genesis Global Holdco LLC files for bankruptcy after losses from crypto hedge fund and exchange collapses.
• The company estimates over 100,000 creditors and liabilities between $1 billion and $10 billion.
• The bankruptcy has implications for the larger crypto industry as it shares the same parent company as Grayscale Bitcoin Trust.

Genesis Global Holdco LLC, the parent company of troubled cryptocurrency lender Genesis Global Capital, has filed for Chapter 11 bankruptcy protection. This move comes after the company reportedly suffered losses of several hundred million dollars due to its exposure to failed crypto hedge fund Three Arrows Capital and the collapse of crypto exchange FTX in late 2022. The collapse of FTX was the final straw for Genesis, which had already been struggling due to its exposure to Three Arrows Capital.

In its filing, Genesis Global Capital, the partner firm to Gemini's defunct Earn program, estimated more than 100,000 creditors and between $1 billion and $10 billion in liabilities, as well as assets. The company's other subsidiaries, Genesis Asia Pacific Pte. Ltd and Genesis Global Capital, LLC, also filed for bankruptcy protection and estimated their assets and liabilities in the $100 million and $500 million range, respectively. All three fall under the umbrella of Digital Currency Group, which also owns CoinDesk. Genesis has moved for joint administration of the cases.

Genesis owes over $3.5 billion to its top 50 creditors, among which include Crypto exchange Gemini, trading giant Cumberland, Mirana, MoonAlpha Finance and VanEck’s New Finance Income Fund, according to the bankruptcy filing published late Thursday. Those companies comprise Genesis' crypto lending business, which was rocked last year by the implosions of hedge fund Three Arrows Capital and crypto exchange FTX.

Genesis' other subsidiaries involved in the derivatives and spot trading and custody businesses as well as Genesis Global Trading were not included in the filing and continue client trading operations, according to a press release. In its filing, Genesis Global Capital said it expects that through the restructuring process, there will be money left over to pay unsecured creditors – a group that can get wiped out in bankruptcy cases if the situation is extremely dire.

Shortly after FTX collapsed into its own bankruptcy case in November, Genesis Global Capital was forced to suspend customer withdrawals, which hurt customers of a yield product offered by the Winklevoss twins' crypto exchange, Gemini. Genesis had been scrambling to raise fresh capital or reach a deal with creditors. It – along with parent company Digital Currency Group (DCG), which also owns CoinDesk – was under increasing pressure to make good on $900 million of locked deposits.

The bankruptcy "is a crucial step towards us being able to recover your assets," Gemini's Cameron Winklevoss tweeted shortly after the filing was announced. In the same tweet thread, the Gemini CEO threatened to sue DCG CEO Barry Silbert over the repayment of the loan. The tweet comes after Winklevoss waged a Twitter war against DCG to recover the loan amid his exchange’s own struggles.

Genesis late last year retained investment bank Moelis & Co. to assist with exploring options. Before FTX dealt a blow to Genesis, the failure of crypto hedge fund Three Arrows Capital had caused hundreds of millions of dollars in losses for the firm, CoinDesk reported first last year. Earlier this month, Genesis announced it was laying off 30% of its staff, taking it down to 145 employees.

Thursday's bankruptcy filing could have broader implications for bitcoin as Genesis and digital assets manager Grayscale share the same parent company in DCG. Grayscale operates the Grayscale Bitcoin Trust (GBTC), which has $10 billion-plus in assets under management and was late last year trading at a record discount to net asset value, although that discount has narrowed recently. There are market fears that the repercussions of the Genesis bankruptcy could somehow lead to the liquidation of GBTC's holdings of 600,000+ bitcoin.