Genesis Global Trading may be looking at filing for bankruptcy if it doesn’t acquire new funding, Bloomberg reported on Monday.
The report, citing people with knowledge of the matter, said Genesis is struggling to raise new funds for its lending unit. The crypto firm has reportedly been warning investors of a potential bankruptcy filing if new capital doesn’t come through.
Genesis has been trying to raise $1 billion from investors after it halted withdrawals and new loan originations from its lending unit on Nov. 17. The firm said that “unprecedented market turmoil” created by FTX’s collapse resulted in abnormal withdrawal requests that exceeded its current liquidity.
The move to suspend operations on its lending platform came after the company declared it had $175 million locked funds in an FTX trading account earlier in the week.
“This does not impact our market-making activities,” said Genesis at the time, adding that its operating capital and net positions in FTX were not material to its business.
FTX’s Chapter 11 filing of its top 50 creditors lists the third largest creditor as an entity that is owed $174.2 million. Although all the creditors names have been redacted, some have speculated that the third largest FTX creditor is Genesis, with the latter having declared its balance locked on the exchange to be a similar amount.
Genesis, owned by Digital Currency Group (DCG), is one of the largest market makers in the crypto space. A potentially insolvent Genesis would likely have a far reaching impact on DCG itself and the wider crypto market. (In today’s Premium newsletter, Ram Aluwahlia of Lumida explains why he believes Genesis is likely insolvent.)
Rumors have also been circulating that DCG owes $1.1 billion to Genesis through a previously undisclosed promissory note. This has led some investors to reason that this was the rationale as to why DCG wasn’t stepping in to provide Genesis with capital relief.At press time, Bitcoin was trading at $15,800, down 3.12% in the last 24 hours. Ethereum was trading at $1,115, down 2.9% over the same period.