Cryptocurrency brokerage Genesis Global Capital is planning to file for bankruptcy as soon as this week, Bloomberg reported. Genesis has been struggling to raise capital since the fallout of Sam Bankman-Fried’s crypto exchange FTX.
Genesis’ lending unit was forced to suspend redemptions and new originations in November 2022 as a result of the FTX collapse. Genesis has been in confidential talks with various creditors to address its liquidity crunch. The company has cautioned that it may have to file for bankruptcy if it fails to raise cash.
Genesis, a unit of Barry Silbert’s crypto conglomerate Digital Currency Group (DCG), recently laid off 30% of its workforce following 20% job cuts in August 2022. It suffered huge losses due to the loans extended to crypto hedge fund Three Arrows Capital, which filed for bankruptcy last year.
The Wall Street Journal had previously reported that Genesis was working with investment bank Moelis & Co. to explore its options, including a potential bankruptcy filing. DCG owes Genesis $447.5 million and 4,550 Bitcoins worth about $78 million. Earlier this month, Genesis Global Trading’s interim CEO Derar Islim stated that the company needs additional time to resolve the financial crisis in its lending business.
High interest rates, the FTX collapse, and multiple bankruptcies have pushed investors away from risky assets like crypto. It has also brought to light the need for stringent regulation of the crypto market due to the numerous risks involved. Bitcoin (BTC-USD), the largest cryptocurrency, has tumbled over 50% over the past year, although it has begun 2023 on a positive note.