Crypto broker Genesis tries to avoid bankruptcy: $1 billion loan

Genesis, one of the most prominent crypto lenders, says it is trying to avoid bankruptcy, following the difficulties triggered by the collapse of FTX, of which it was a major victim. 

That is why in the last few hours it has applied for a $1 billion emergency loan. The news leaks on Watcher.Guru‘s official Twitter account, which reads:

JUST IN: Crypto lender Genesis says they are trying to avoid bankruptcy, following requests for a $1 billion emergency loan.

— Watcher.Guru (@WatcherGuru) November 30, 2022

Here’s how Genesis is trying to avoid bankruptcy

Bankruptcy, unfortunately, seems to be the theme of this year’s crypto-verse. In fact, a substantial group of companies has faced insolvency in the past two months, partly due to the collapse of the popular FTX exchange. 

Among the many is the famous cryptocurrency brokerage firm, Genesis, which, despite its difficulties, is trying to avoid declaring bankruptcy, according to recent reports. 

Specifically, it appears that the company’s creditors were in discussions with lawyers and law firms such as Proskauer Rose and Kirkland & Ellis, which specialize in restructuring to avoid insolvency. 

In doing so, they intend to apply for a $1 billion emergency loan that would bring breathing space to the company. The creditors’ main concern is to prevent the occurrence of a situation similar to FTX. 

A Genesis spokesman said:

“Our goal is to resolve the current situation in the lending industry without the need to file for bankruptcy.”

Is there anyone who can save crypto broker Genesis? 

Unfortunately, Genesis has been exposed to the fall of FTX and Three Arrows Capital. Indeed, it was recently revealed that the company poured $2.36 billion into the struggling company Three Arrows Capital. 

And, while the cryptocurrency broker was dealing with this problem, the collapse of FTX led to another loss of about $7 million. The platform’s derivatives business reportedly resulted in a total of $175 million in blocked funds.

Furthermore, it is worth noting that Genesis has about $2.8 billion in outstanding loans. Hit by an immense loss, Genesis was seeking financing to avoid bankruptcy. 

Binance, the exchange whose CEO is Changpeng “CZ” Zhao, apparently backed out of helping Genesis. At that point, Genesis’ interim CEO, A. Derar Islim, still had hope in other platforms. 

Indeed, in a recent letter to his clients, Islim wrote: 

“We have entered into discussions with prospective investors and our largest lenders and borrowers, including Gemini and DCG, to agree on a solution that supports the overall liquidity of our lending business and meets customer needs.”

What happened to Genesis after the collapse of FTX 

After the collapse of FTX, as we all know, there was a chain reaction that affected the entire cryptocurrency world. In fact, the threat also came to Genesis, one of the most respected institutions in the industry. 

On 16 November, Genesis Global Capital‘s lending division suspended withdrawals due to unprecedented market turmoil. Now, the company is trying to obtain emergency financing of at least $500 million to make sure it has enough liquidity to pay its clients. 

Meanwhile, the entire industry is nervously watching developments. In any case, on 21 November, Genesis stated: 

“We have no plans to file for bankruptcy any time soon.”

They later appointed an outside consultant to assess their financial situation, though the company’s moves failed to calm customers. 

The suspension of withdrawals this year anticipated the collapse of several cryptocurrency companies, such as in the case of FTX and Celsius. In addition, Genesis did not respond to questions from Wired UK, which had asked the company whether it had considered a bankruptcy filing.

A possible bankruptcy of Genesis, no doubt, would be another blow to an industry already tested by the fall of FTX, one of the most respected companies in the sector. 

Naturally, it is reasonable to ask whether, from the moment an institution of Genesis’s caliber is vulnerable, it is possible to place confidence in other CEXs. 

In any case, we know this is not the first crisis faced by the crypto market. In fact, forecasts indicate that the industry will survive the current downturn, although how and when this will happen cannot be predicted.