Genesis, a cryptocurrency lender, declares bankruptcy

Genesis, a cryptocurrency lender, has declared bankruptcy.

The Securities and Exchange Commission (SEC) of the United States recently charged the firm with illegally selling cryptocurrency.

It is a subsidiary of the Digital Currency Group (DCG), a conglomerate of over 200 crypto-focused companies.

Genesis’ insolvency is linked to FTX’s bankruptcy, which occurred last November amid allegations of fraud.

Genesis was founded as a “over the counter” Bitcoin trading desk, allowing for the exchange of large amounts of cryptocurrency.

It announced earlier this month that it would lay off 30% of its workforce, reducing it to 145 employees.

“We look forward to moving forward with our dialogue with DCG and our creditors’ advisers as we seek to implement a path to maximise value and provide the best opportunity for our business to emerge well-positioned for the future,” Genesis interim CEO Derar Islim said in a statement.

The ripple effect

Genesis was harmed by the bankruptcy of another cryptocurrency firm, Three Arrows Capital, in June of last year.

It claimed it was owed $1.2 billion (£971 million) by Three Arrows, which had been brought down by the May collapse of cryptocurrencies Luna and TerraUSD.

It is the latest in a string of setbacks for the sector, which has been dubbed the “crypto winter” by some analysts due to the precipitous drop in the value of cryptocurrencies.

Continued fallout

Genesis is also embroiled in a high-profile dispute with Gemini, which is owned by former Olympic rowers Cameron and Tyler Winklevoss, over the fate of $900 million in assets deposited with the lender by Gemini customers.

The Gemini Earn product was pitched to investors as a way to earn up to 7.4% interest on their cryptocurrency holdings.

Since November, when Genesis halted withdrawals due to market volatility, approximately 340,000 Earn users have been unable to access their funds.

The SEC charged Genesis and Gemini last week with illegally selling crypto assets to investors. The Winklevoss twins stated that they were looking forward to defending the action, but DCG has yet to respond.

Cameron Winklevoss took to Twitter shortly after Genesis declared bankruptcy.

You can see original Tweet here

The bankruptcy filing comes as the fallout from the FTX collapse continues.

Founder Sam Bankman-Fried is accused of fraud after diverting funds deposited by millions of customers on his FTX platform and transferring them to Alameda, a hedge fund, without authorization.

The 30-year-old was extradited from the Bahamas, where FTX was based, to the United States in December, where he formally pleaded not guilty to charges of defrauding customers and investors.

He was released on bail of $250 million after denying the allegations.

Source : BBC News