Daily Management Review

Insolvent Crypto Lender Genesis Positive Of Resolving Its Conflicts With Creditors


Insolvent Crypto Lender Genesis Positive Of Resolving Its Conflicts With Creditors
The cryptocurrency lender Genesis Global Capital had some hope of resolving its conflicts with creditors by this week, with the aim of exiting Chapter 11 by late May, said a lawyer for the bankrupt firm. 
The lawyer, Sean O'Neal, testified at an initial hearing in Manhattan bankruptcy court for Genesis Global Capital, the crypto lending company owned by Barry Silbert's venture capital firm Digital Currency Group.
On Jan. 19, Genesis and two lending units filed for bankruptcy protection from creditors, two months after it froze customer withdrawals in the aftermath of Sam Bankman-FTX Fried's exchange's failure.
The filing came after the bankruptcies of cryptocurrency lenders Celsius Network, Voyager Digital, and BlockFi in July.
O'Neal stated that Genesis has "some measure of confidence" that its disputes with creditors will be resolved this week, after about two months of negotiations, and that it will seek mediation if necessary.
"Sitting here right now, I don't think we're going to need a mediator," he said. "I'm very much an optimist."
Brian Rosen, a lawyer for creditors with $1.5 billion in claims, stated that "we are getting closer" to an agreement.
Genesis was granted a series of "first-day" motions by US Bankruptcy Judge Sean Lane, including the payment of employees and critical vendors, which is common in bankruptcy cases.
Lane also stated that Genesis was not required to reveal customer names in its lists of creditors, citing customers' privacy concerns, and suggested that if their names were made public later, Genesis should warn them about possible phishing scams.
Genesis has stated that it intends to auction off various assets and exit bankruptcy by May 19.
The firm announced slightly more than $5 billion in assets and liabilities, and has stated that it owed at least $3.4 billion to more than 100,000 creditors. It estimated that it owed its parent nearly $1.7 billion.
Genesis' bankruptcy does not include DCG, as well as Genesis' derivatives and spot trading, custody, and brokerage operations. DCG also owns the asset manager Grayscale as well as the news service CoinDesk.
Silbert has clashed with identical twins Cameron and Tyler Winklevoss, the former US Olympic rowers who run the cryptocurrency exchange Gemini, which is owed $765.9 million by Genesis and is its largest creditor.
Genesis and Gemini were charged by the Securities and Exchange Commission on January 12 with illegally selling unregistered securities through their Gemini Earn lending product.
The Winklevosses have stated that Genesis should repay the $900 million in assets owed to approximately 340,000 Earn investors, and Cameron Winklevoss has demanded that Silbert be fired.
Chris Marcus, a lawyer for Gemini and other creditors, told Lane that while "there is some work to be done" to get everyone on the same page, he was "cautiously optimistic" that the disputes could be resolved without the use of a mediator.
According to a person familiar with the matter, Genesis' borrowers also include hedge fund Three Arrows Capital and Alameda Research, a trading firm affiliated with FTX.
Three Arrows and Alameda are also in the process of declaring bankruptcy.