Crypto Meltdown Continues As Genesis Is Reportedly Filing For Bankruptcy This Week

Crypto lender and Digital Currency Group affiliate Genesis Global Trading Inc. is reportedly filing for Chapter 11 bankruptcy protection as early as this week after it suffered from major losses to loans extended to controversial crypto businesses Alameda Research and Three Arrows Capital (3AC).

After Genesis halted its withdrawals on Nov. 15, just days after the controversial meltdown of the crypto empire FTX, industry watchers anticipated that it was only a matter of time before the crypto lender filed for bankruptcy.

But it looks like it is now preparing to do just that. Bloomberg News, citing people with knowledge of the situation, reported that the filing for bankruptcy could happen anytime this week.

Genesis has been "in confidential negotiations" due to "a liquidity crunch" over the past week and has warned that it might need to file for bankruptcy should it fail to raise funds, the report revealed.

The writing is on the wall.

Since late last year, Genesis showed signs that it was struggling to stave off the negative impacts of the prolonged crypto winter that sent most crypto prices to their new lows.

The crypto lender suffered much after its extended loans to crypto hedge fund Alameda Research and Three Arrows Capital which filed for bankruptcy last year.

Earlier this month, Genesis let go of 30% of its workforce and said that it has to "navigate unprecedented industry challenges." The company was also reported to be working with the investment bank Moelis & Co. to assess its options for the future, including a possible filing of chapter 11.

Aside from laying the groundwork for the bankruptcy filing, the crypto lender is also in talks with its creditors on a potential prepackaged bankruptcy plan, suggesting that both sides might come to a restructuring agreement ahead of any filing with the deal finalized in the bankruptcy court, The Block reported.

The U.S. Securities and Exchange Commission (SEC) last week filed charges against Genesis and regulated crypto exchange platform Gemini for allegedly offering and selling unregistered products and securities through the Gemini Earn Program.

"Today we charged Genesis Global Capital, LLC and Gemini Trust Company, LLC for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program," the SEC said last week on its official Twitter account.

On January 3, Cameron Winklevoss, the co-founder of the centralized CEX Gemini gave Genesis an ultimatum to solve its issue with Gemini investors.

"Will you, or will you not, commit to solving this by January 8th in a manner that treats the $1.1 billion promissory note as $1.1 billion," Winklevoss tweeted.