Crypto Lender Genesis Files for Bankruptcy

The SEC charged the firm with illegally marketing crypto.

The Digital Currency Group (DCG) is a conglomeration of over 200 crypto-focused companies.

Genesis’ bankruptcy is tied to FTX’s, which collapsed in November amid fraud suspicions.

Genesis began as an “over-the-counter” Bitcoin trading desk, allowing big crypto trades.

It cut 30% of its workers to 145 earlier this month.

“We look forward to continuing our engagement with DCG and our creditors’ counsel as we seek to execute a path to maximize value and provide the best potential for our business to emerge well-positioned for the future,” Genesis interim CEO Derar Islam said.

Ripple effect

Genesis was hurt by Three Arrows Capital’s June 2018 bankruptcy.

Three Arrows, which collapsed in May after Luna and TerraUSD collapsed, owes it $1.2bn (£971m).

The “crypto winter”—the drop in cryptocurrency prices—is the latest shock to the market.

Ongoing fallout

Genesis is also in a high-profile battle with Gemini, headed by former Olympic rowers Cameron and Tyler Winklevoss, with over $900m in funds deposited by Gemini customers.

Gemini Earn promised investors 7.4% income on their cryptocurrency investment.

Since November, Genesis has blocked withdrawals for 340,000 Earn members because of crypto market volatility.

The SEC accused Genesis and Gemini of improperly marketing crypto assets to investors last week. The Winklevoss twins stated they were excited to defend the action, but DCG has not commented.

After Genesis declared bankruptcy, Cameron Winklevoss tweeted.

As the FTX fall continues, the bankruptcy filing is another blow.

Sam Bankman-Fried, the FTX founder, is accused of fraud for shifting millions of consumers’ cash to Alameda, a hedge fund, without authorization.

The 30-year-old was extradited from the Bahamas, where FTX was domiciled, to the US in December and pled not guilty to cheating customers and investors.

Defending himself, he was released on $250m bail.