Digital-asset brokerage Genesis Global Trading Inc is struggling to raise fresh cash for its lending unit, and it is warning potential investors that it might need to file for bankruptcy if its efforts fail, people with knowledge of the matter have said.
Genesis has spent the past several days seeking at least US$1 billion in fresh capital, said the people, who asked not to be identified because discussions are private.
That included talks over a potential investment from crypto exchange Binance Holdings Ltd (幣安), they said, but funding so far has failed to materialize.
Photo: Bloomberg
The rush for funding was precipitated by a liquidity crunch at the lender after the sudden collapse of FTX Group, one of the world’s largest crypto exchanges.
Genesis halted redemptions shortly after revealing on Nov. 10 that it had US$175 million locked in an FTX trading account.
“We have no plans to file bankruptcy imminently,” a representative for Genesis said in an e-mailed statement. “Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”
Other platforms are facing their own struggles as redemption requests roll in after FTX’s bankruptcy filing roiled the crypto sector and left investors on edge about the risk of contagion.
Genesis is a counterparty to many in the digital asset space and is closely watched as a gauge of the industry’s strength. It is among the crypto lenders that are feeling acute strain after a prolonged rout in virtual coin prices amid multiple high-profile blowups.
The difficulties at Genesis have also buffeted the billionaire Winklevoss twins Tyler and Cameron, owners of the crypto exchange Gemini Trust Co.
In response to Genesis suspending withdrawals, Gemini halted redemptions from its Earn product. That left in limbo a program that, according to a person familiar with the matter, has US$700 million of customer money tied up in it.
An FTX Group bankruptcy filing showed that the fallen cryptocurrency exchange and a number of affiliates had a combined cash balance of US$1.24 billion.
The document from Alvarez & Marsal North America LLC, the proposed financial adviser to FTX, said trading house Alameda Research LLC and related firms had a cash balance of almost US$401 million.
Among FTX exchange platforms, FTX Japan had a cash balance of US$171.7 million, the breakdown showed.
The latest tally as of Sunday “identifies substantially higher cash balances than the debtors were in a position to substantiate as of Wednesday, Nov. 16,” according to the filing.
Sam Bankman-Fried’s FTX empire slid into a chaotic bankruptcy on Nov. 11, potentially leaving more than 1 million creditors and fomenting turmoil in the crypto sector.
Earlier court papers showed that FTX-linked entities owed their 50 biggest unsecured creditors a total of US$3.1 billion.
Preliminary filings have also indicated FTX assets and liabilities of at least US$10 billion each.
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