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Genesis files for bankruptcy; Winklevoss threatens to sue DCG

Genesis files for bankruptcy; Winklevoss threatens to sue DCG

Crypto broker Genesis has filed for Chapter 11 bankruptcy protection, listing debts of around $3.5 billion. On the same day, Gemini co-founder Cameron Winklevoss has threatened to sue Genesis parent company Digital Currency Group and its CEO Barry Silbert.

The bankruptcy filing had been expected as Genesis faced up to the FTX fallout, which had already forced to it to stop customer withdrawals.

The filing lists more than 100,000 creditors, with aggregate liabilities ranging from $1.2 billion to $11 billion dollars.

Derar Islim, interim CEO, Genesis, says: "While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders."

Despite the bankruptcy filing, Winklevoss is threatening to sue DCG, saying that Genesis owes more than 340,000 of its customers a total of $900 million.

Gemini partnered Genesis for its Earn interest-bearing product, but customer assets were frozen after Genesis halted withdrawals following the FTX collapse.

"We have been preparing to take direct legal action against Barry, DCG, and others who share responsibility for the fraud that has caused harm to the 340,000+ Earn users and others duped by Genesis and its accomplices," Winklevoss tweeted.

Last week, the Securities and Exchange Commission charged both Genesis and Gemini with offering and selling unregistered securities over the Earn product - which was ended earlier this month.

Comments: (3)

A Finextra member
A Finextra member 20 January, 2023, 16:38Be the first to give this comment the thumbs up 0 likes

Where have we heard this story before? A bunch of apparently smart business leaders investing in vehicles that they didnt understand, run by unscrupulous businesses,   with asset valuations that didnt make sense. Valuations based on a bunch of assets that had nebulous value, which could collapse easily collapse in a recession...........   If we dont study history we are destined to repeat it (ad nauseam).......   On the up side, and again, there will be people who have, surrepticiously or overtly, trousered millions of dollars and walked away.... Oh the UK is reducing banking security limits too!!!   Triple's all round! 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 23 January, 2023, 11:16Be the first to give this comment the thumbs up 0 likes

While there are elements of tokens of questionable value, tech-enabled backdoors to siphon money, and so on, in principle, 3AC, Voyager, Genesis etc. are all more-or-less like garden variety bank bankruptcies: take deposit, give loan, fail to collect from borrowers, fail to pay depositors. In banking, there's a lender of last resort in the form of central bank, there isn't in crypto.

A Finextra member
A Finextra member 23 January, 2023, 13:51Be the first to give this comment the thumbs up 0 likes

The taxpayer was there for the banks - VCs wont be there for the crypto crowd.....   Brokers shouldnt be taking on credit risk if they are holding client funds!