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Breaking: Genesis is reportedly planning to file for bankruptcy soon

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Breaking: Genesis is reportedly planning to file for bankruptcy soon

  • Genesis has reportedly started to prepare for a bankruptcy filing, which could be done by the end of this week
  • The crypto lender owes creditors over $3 billion

Troubled crypto lending platform – Genesis Global – has started to move towards filing for bankruptcy, according to a report by Bloomberg. The platform could file for bankruptcy as soon as this week. And, it has been on the brink of bankruptcy since November 2022, with the platform trying to raise nearly a billion in funds.

Troubles mounting for Genesis and parent firm

Notably, the report comes days after Digital Currency Group (DCG) – the parent firm of Genesis – suspended quarterly dividends. This was a means to preserve liquidity and reduce operating costs. In addition, the crypto lending platform has been in a tiff with Gemini – a leading American crypto exchange – since the start of the year. The cause of the friction is the suspension of withdrawals on Genesis, a move made in November as a result of the FTX collapse.

Since then, Gemini’s Earn users have been unable to access their funds. The crypto exchange had nearly 340,000 users participating in its Earn program. The approximate amount locked in Genesis currently stands at $900 million. And, the dead-end conversations have resulted in Cameron Winklevoss – CEO of Gemini – calling for the removal of Barry Silbert from the position of CEO.

Moreover, the tiff was met with the intervention of the U.S. Securities and Exchanges Commission (SEC). The regulatory body levied charges against both platforms for selling unregistered securities. The action came despite Gemini’s efforts to work with the regulatory body on its Earn program.

A recent report by The Block states that the creditors of Genesis, including Gemini, are “negotiating a prepackaged bankruptcy plan”.  Under this, Gemini and other creditors would receive cash and equity in DCG for giving a forbearance period of up to two years.

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Genesis owes creditors billions

Notably, the crypto lender is liable to pay creditors over $3 billion, including Gemini users. As a way to pay them, its parent company was considering selling some of its assets to raise capital. The platform was exploring the sale of some of its investments, which amounts to approximately $500 million. DCG had invested in nearly 200 crypto projects, which include banks, exchanges, and custodians.

Bankruptcy

Gemini co-founder threatens lawsuit against DCG, Barry Silbert

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Gemini co-founder threatens lawsuit against DCG, Barry Silbert

Gemini co-founder threatens lawsuit against DCG, Barry Silbert Oluwapelumi Adejumo · 2 hours ago · 1 min read

Cameron Winklevoss argued that Genesis’ bankruptcy does not insulate Barry Silbert or DCG from accountability.

1 min read

Updated: January 20, 2023 at 8:41 am

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Cover art/illustration via CryptoSlate

Gemini co-founder Cameron Winklevoss threatened a lawsuit against crypto conglomerate Digital Currency Group (DCG) and its CEO Barry Silbert if they failed to make a “fair offer” to creditors like Gemini Earn users.

Gemini is prepared to take “direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices,” according to Winklevoss’ Jan. 20 Twitter thread.

Genesis’ bankruptcy, a crucial step

Winklevoss said Genesis’ bankruptcy was crucial to recovering Earn users’ assets. He added that the bankruptcy would subject the firm to a judicial oversight that would force it to reveal “machinations that brought us to this point.”

However, he argued that Genesis’ bankruptcy does not insulate Silbert or DCG. Winklevoss added:

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“We also believe that — in addition to owing creditors all of their money back — Genesis, DCG, and Barry owes them an explanation. Bankruptcy court provides a much-needed forum for that to happen. Sunlight is the best disinfectant.”

Winklevoss and Silbert have been engaged in a public dispute over the $900 million owed by Genesis to Gemini Earn. The exchange co-founder accused Silbert of employing “bad faith stall tactics” and called for Silbert to be sacked.

Meanwhile, Genesis disputed the claim that it owes Gemini customers $900 million — court filing showing that the debt to Gemini Earn customers stands at $765.9 million.

The U.S. Securities and Exchange Commission (SEC) charged both firms with selling unregistered securities offerings on Jan. 12.

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1 billion

Osprey Vies For Control Of Grayscale’s Bitcoin Trust; Tron’s Justin Sun Offers To Invest Up To $1B On DCG Assets

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Osprey Vies For Control Of Grayscale’s Bitcoin Trust; Tron’s Justin Sun Offers To Invest Up To $1B On DCG Assets

Following charges by the U.S. Securities and Exchange Commission against the crypto exchange Gemini and the digital currency lender Genesis, Tron founder Justin Sun told the press that he may be able to purchase assets from Genesis, up to $1 billion, “depending on their evaluation of the situation.” Additionally, the crypto investment manager Osprey has published an open letter to Barry Silbert of Digital Currency Group in an attempt to take over the management of Grayscale’s Bitcoin Trust (GBTC).

Osprey Proposes Management Changes to Grayscale’s Bitcoin Trust in Open Letter to Digital Currency Group

On Jan. 12, 2023, the U.S. Securities and Exchange Commission (SEC) filed charges against the crypto exchange Gemini and crypto lender Genesis Global Capital. The crypto lender Genesis Global Capital is a Digital Currency Group (DCG) subsidiary. The regulator claims that the two organizations took part in an “unregistered offering.”

The SEC said that roughly three years ago, Gemini and Genesis gave investors the opportunity to loan crypto assets in exchange “for Genesis’ promise to pay interest.” The SEC charges followed two letters written by Gemini co-founder Cameron Winklevoss (letter 1, letter 2) and a recent shareholders letter by Silbert denying the accusations.

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The open letter to Barry Silbert from Osprey on Jan. 13, 2023.

The following day, the crypto investment manager Osprey published an open letter to Barry Silbert, the CEO of Digital Currency Group (DCG). Osprey wants to take over the Grayscale Bitcoin Trust (GBTC) as the fund believes “Osprey is the best-positioned third party to manage GBTC at this point.” DCG is the parent firm of Grayscale, and Osprey is not the first digital currency fund to offer help; the Tennessee-based crypto asset manager Valkyrie Investments is also vying to take over GBTC. Like Osprey, Valkyrie published an open letter to DCG stating that it is “uniquely qualified” for the role.

In its letter, Osprey detailed that if it were to take over GBTC’s management, it would change a few things associated with the Bitcoin Trust. “We would slash the management fee to 0.49% and clean up the expense structure of the fund, which contains significant conflicts of interest,” Osprey said on Friday. “We would also seek to implement a redemption program as soon as possible.” The digital currency fund manager added:

We would pursue a listing on NYSE immediately but from a position of collaboration with regulators. For example, we would not engage in any lawsuits against the SEC, but instead, would work directly with Congress to enlighten the SEC as to the rationale of approving the fund as an exchange-listed, ETP.

The company thinks that it is extending a hand in order to show continued commitment to shareholders. Osprey insists that DCG and Silbert should allow the fund to take over as soon as possible. “We urge you to install Osprey Funds as the sponsor of GBTC immediately, both to protect GBTC holders and provide confidence to the non-DCG-affiliated stakeholders of GBTC and Grayscale who have an interest in the preservation of value,” Osprey said.

Tron’s Justin Sun Offers to Invest $1 Billion in Digital Currency Group Assets Amid SEC Charges Against Gemini and Genesis

Meanwhile, Tron’s Justin Sun has told Reuters that he too is also willing to lend a hand. Sun said that he would consider investing $1 billion into Digital Currency Group (DCG) assets, but it depends on the “evaluation of the situation.” Sun also offered to help FTX the day before the exchange filed for bankruptcy on Nov. 11, 2022.

Tron’s Justin Sun (pictured above) is willing to lend a hand by buying $1 billion worth of DCG assets depending on the “evaluation of the situation,” the Tron founder told Reuters.

At the time, Sun said his team was working around the clock to help alleviate the situation with FTX, and he also remarked that he was taking steps to help FTX. However, none of the promises came to fruition and the following day, FTX filed for Chapter 11 bankruptcy protection and Sam Bankman-Fried stepped down as CEO.

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It’s uncertain whether or not Digital Currency Group (DCG) or Genesis will accept help from organizations and individuals within the crypto industry. The company did not respond to Valkyrie’s attempt to sponsor GBTC over Grayscale during the first week of the new year.

Furthermore, Grayscale has been involved in an ongoing legal dispute with the SEC over denying GBTC being converted into an exchange-traded fund (ETF). Grayscale believes if the SEC allowed them to convert GBTC into an ETF, it would allow them to issue and redeem Bitcoin Trust shares. Grayscale has criticized the commission’s reasoning greatly and stressed that the U.S. regulator’s “central premise is illogical.”

Tags in this story

1 billion, Accusations, Assets, Bankruptcy, Barry Silbert, bitcoin trust, ceo, Charges, Collaboration, Congress, Crypto, crypto assets, crypto industry, DCG, denial, Digital Currency Group, ETF, ETP, evaluation, ftx, Gemini, genesis, grayscale, help, Interest, investment, justin sun, Lawsuits, legal dispute, Letter, listing, loan, Management, non-DCG-affiliated, NYSE, offering, Osprey, preservation, Regulators, Sam Bankman-Fried, SEC, Shareholders, situation, sponsor, stakeholders, tron, unregistered, Valkyrie, Winklevoss

What do you think about the ongoing legal disputes and the potential management changes proposed by Osprey and Tron’s Justin Sun’s investment offer? Do you believe it’s a step in the right direction for the crypto industry or could it lead to more complications? Share your thoughts in the comments below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Alabama Securities Commission

Report: State Securities Regulators Probe Crypto Lender Genesis

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Report: State Securities Regulators Probe Crypto Lender Genesis

State securities regulators are reportedly investigating Genesis Global Capital in a broad range probe into the “interconnectedness of crypto firms,” Barron’s reported on Friday. The report notes that the Alabama Securities Commission is looking into whether or not cryptocurrency firms have violated securities laws without filing the proper registrations.

Report Says Financial Regulators Are Investigating Genesis Global Capital and the Interconnected Activities of Other Crypto Firms

There’s been a lot of focus on Genesis Global Capital and its lending operation since Genesis announced on Nov. 16, 2022 it was temporarily suspending withdrawals and new loan originations. Days later, the New York Times (NYT) reported that Genesis Global Capital hired a restructuring adviser. The NYT report detailed that Genesis “hired the investment bank Moelis & Company to explore options including a potential bankruptcy, three people familiar with the situation said.”

However, reports published by The Block and the Wall Street Journal shared a letter written by Barry Silbert, the CEO of Genesis’ parent company Digital Currency Group (DCG). Silbert’s letter reassures DCG shareholders that his company will “continue to be a leading builder of the industry.” Silbert did touch upon Genesis in the shareholder letter and he highlighted that it’s important to note that the lending arm of Genesis has had “no impact on Genesis’ spot and derivatives trading or custody businesses, which continue to operate as usual.”

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On Friday, Barron’s author Joe Light reported on Genesis Global Capital and the report claims that state securities regulators are involved in an alleged Genesis probe. Light cited the Alabama Securities Commission and its director Joseph Borg as one of the states looking into the alleged “interconnectedness of crypto firms.”

Light’s report indicates the ostensible probe involves agencies from “several other states” but as far as other crypto firms, only Genesis was mentioned. “Borg declined to name the other companies,” the Barron’s author detailed. The report further claims the probe’s general focus is on “whether Genesis and other companies enticed residents to invest in crypto-related securities without making the proper registrations.”

State securities regulators in the United States have been cracking down and investigating crypto firms for quite some time. Regulators from specific states have filed actions against a number of cryptocurrency firms like Celsius, Blockfi, Nexo, and FTX. The securities regulators’ complaints are all very similar, as they question whether or not crypto firms are selling unregistered securities to retail investors.

Tags in this story

Alabama Securities Commission, alleged investigation, Bankruptcy, Barron’s, Barry Silbert, DCG, DCG CEO, Digital Currency Group, genesis, Genesis Global Capital, Interconnected Activities, Joe Light, Joseph Borg, NYT, Regulations, Regulators, restructuring, restructuring options, Securities, Shareholders, state securities regulators

What do you think about the report that says there’s an alleged investigation into Genesis and crypto company interconnectedness? Let us know what you think about this subject in the comments section below.

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Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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