When the news hit in late January that crypto lender Genesis filed for bankruptcy, it seemed to many in the sector that Genesis would be the next domino to fall. However, the company’s lawyers and executives have expressed confidence that they can weather the financial storm. Genesis cited crypto scam FTX’s collapse and the downfall of Three Arrows Capital as causes of its debt problems.
The Road to Solvency Is Paved with Good Intentions
Of course the road back to solvency won’t be painless, but Genesis attorney Sean O’Neal stated at an initial hearing at a Manhattan bankruptcy court that he expects the crypto lender to emerge from Chapter 11 as early as May. O’Neal also predicts mediation won’t be required, and that Genesis can resolve its disputes with creditors quickly.
Genesis Global Capital is run by Digital Currency Group, founded by Barry Silbert. The lending units have filed for bankruptcy, while Genesis’ other segments, including Genesis Global Trading, won’t be affected by bankruptcy proceedings for the crypto lending segment.
Those crypto lending units said they owe 100,000 creditors a total of $3.4 billion and have assets and liabilities totaling $5 billion.
U.S. bankruptcy judge Sean Lane has ordered Genesis to pay employees and vendors. A deal to compensate creditors is currently being negotiated.
New Beginnings are Difficult: The SEC, Winklevoss Twins, and Other Obstacles
Among Genesis’s more high-profile clients are Olympic rowing champions Cameron and Tyler Winklevoss, famously known as the Winklevoss twins, who run the Gemini crypto exchange. The Winklevoss twins have expressed impatience with Genesis, which owes them $769 million. They are claiming the amount they are owed is closer to $900 million and are agitating for Silbert’s removal.
Although Genesis’s saga seems to be a story mainly about bankruptcy, it should be noted that there is a crypto scam angle as well and it includes the Winklevoss twins; both Genesis and Winklevoss-owned Gemini were charged by the U.S. Securities and Exchange Commission for selling an unlicensed cryptocurrency product.
This lends support to the cynical conclusion of many cryptocurrency news stories –– scratch any crypto company, and you’ll discover a crypto scam just beneath the surface.
However, it’s also possible to be optimistic and believe that Genesis will clean up its act according to SEC guidelines as well as bounce back from Chapter 11. This is, of course, a tall order. The infighting between the Winklevoss twins and Barry Silbert is just an interesting sideshow.
It’s undeniable that one takeaway from Genesis’s current troubles is the far reaching effects of crypto scams, which send shockwaves through the entire sector. It should be noted that Genesis’ problems began with the collapse of Three Arrows Capital and crypto scam FTX.
As Genesis customers were desperately cashing out of their crypto holdings in the wake of those catastrophes, Genesis sold assets and went into debt to cover the mounting withdrawals. The crypto lender sought an emergency bailout of $1 billion, but no one provided aid. It was then forced to freeze withdrawals and eventually, to file Chapter 11.
Takeaways from the Genesis Bankruptcy Case
Genesis may not be an outright crypto scam, although, as we see, it has had problems with regulators. Nevertheless, the case of Genesis demonstrates that any crypto exchange or lender can encounter financial headwinds, especially given the volatility of crypto currencies.
Since Genesis is seeking legal avenues to return money to clients, it’s not the same as dealing with a crypto scam. It’s likely that crypto recovery will happen, but clients will have to wait for the company to work out its financial problems and will depend on the rulings of the federal bankruptcy judge.
Whether you lose money to a crypto scam or to a crypto company that files for bankruptcy, it’s important to have MyChargeback on your side when making a crypto recovery claim. We will investigate your case and create a crypto report that will help you on the road to crypto recovery.
Have You Lost Money to Genesis? Talk to MyChargeBack Professionals Today
If you have lost money to financial fraud, talk to the MyChargeBack team. Our investigations will provide evidence to bolster your claim. Our investigation reports are essential for tracking down your funds and getting you started on the road to fund recovery.