According to numerous reports, Genesis, a subsidiary of the Digital Currency Group (DCG), has not made much progress in its negotiations with the company’s creditors.
Therefore, the reports have indicated that the crypto lender is very close to filing for bankruptcy. Sources close to the matter said that the company may file for bankruptcy protection as early as this week.
The Bankruptcy
The first time Genesis had talked about a bankruptcy filing had been back in November after the downfall of the FTX crypto exchange when the crypto lender had paused client withdrawals.
Bloomberg reported that even though the troubled firm and its parent DCG had attempted to reach an agreement with creditors, they had been unsuccessful in doing so.
It was also reported that the company and its creditors were negotiating a plan to file for Chapter 11 bankruptcy.
Unnamed sources said that the proposed deal dictated that a forbearance period of one to two years would be given on payments and the creditors would receive equity and cash from DCG.
FTX disaster
The downfall of FTX resulted in problems for a number of firms in the crypto industry, as it left a hole in their balance sheets.
It caused contagion in the industry, which has continued to spread since November. Genesis had disclosed then that crypto worth $175 million had been locked up on the crypto exchange.
The shortfall that Genesis is facing is somewhere around $3 billion. Crypto exchange Gemini has also come after the crypto lender, claiming that it owes $900 million in customer funds associated with its Gemini Earn program.
The program allows people to generate interest in the digital assets deposited. The funds have been rendered inaccessible to Gemini Earn users since Genesis hit a pause on withdrawals.
Gemini
There has been a public spat between Gemini and Genesis over the matter, with co-founders of Gemini, Cameron and Tyler Winklevoss, and DCG CEO, Barry Silbert, getting involved.
The arguments have heated up significantly, as the Winklevoss twins demanded the resignation of Silbert in recent weeks.
This happened after the two companies had been negotiating for several weeks with no progress. Derar Islim, the Interim CEO of Genesis, announced on January 4th that they needed more time to find a solution to their liquidity issues.
The next day, the company laid off 30% of its staff for stabilizing the firm and reducing costs in times of crisis.
The previous week also saw the Securities and Exchange Commission (SEC) in the United States charge both Gemini and Genesis for the sale of unregistered securities via Gemini Earn.
It had also been reported last week that DCG was looking into selling some of its venture portfolio assets, which comprise stakes in more than 200 projects in the crypto industry.
These include Circle, the issuer of the USDC stablecoin, news reporting site CoinDesk, and crypto exchange Coinbase, as it wants to assist Genesis in covering its shortfall.