Crypto lender Genesis is considering filing for bankruptcy.
A Thursday report from The Wall Street Journal citing people familiar with the matter additionally disclosed that Genesis laid off 30% of its staff — its second round of layoffs in six months.
After this latest round of dismissals, which were not confined to one particular department, Genesis had 145 employees left, the report said.
The news comes after Genesis’s Interim CEO Derar Islim said the company plans to reduce costs and drive efficiencies in all its business lines, in a letter to clients on Wednesday.
Islim also said that the firm was working with its parent company Digital Currency Group and advisors from various client groups to find a solution for the borrowing and lending business.
DCG appears to be facing its own issues amid the crypto downtrend. A report from The Information on Thursday disclosed that DCG was shutting down its $3.5 billion wealth management division called HQ. The company’s closure seems to have come as a surprise to the company’s partners, who were reportedly blindsided by the decision.
As of Q3 2022, Genesis had $2.8 billion in total active loans, according to a quarterly report on the company website. The firm also owes $900 million to users of Gemini Earn, a lending product by crypto exchange Gemini that was forced to freeze withdrawals after Genesis.
Earlier this week, Gemini co-founder Cameron Winklevoss accused DCG CEO Barry Silbert of engaging in “bad faith stall tactics” in working out a resolution plan for Gemini’s affected users. He also referred to DCG’s $1.675 billion debt to Genesis as money that the crypto lender owes to Gemini’s users.
Silbert claims that this figure comprises a $1.1 billion long term promissory note and $575 million worth of debt it assumed on Genesis’s behalf after Three Arrows Capital defaulted on a loan. However, some industry watchers are not satisfied with the explanation for this debt, taking issue with DCG’s lack of transparency around it and suggesting that a lack of fresh capital could lead to a potential declaration of bankruptcy.
Some members of the crypto community believe that DCG and Genesis’s problems extend beyond a liquidity crunch, alleging that the firms are also the subject of an active investigation by the SEC. However, at the time of writing, neither regulators or the companies had issued any statements in that regard.