In the midst of an intense financial crisis, cryptocurrency lending company Genesis Global Trading Inc., controlled by Digital Currency Group (DCG), has laid off 30% of its workforce and is considering filing for bankruptcy. That’s what the Wall Street Journal reported in a report published last Thursday (05). After the most recent wave of layoffs, which occurred across the company on Thursday, Genesis now has 145 employees. Regarding the possible bankruptcy filing, Genesis would be evaluating with the investment bank Moelis & Co. your options. A request for judicial recovery, Chapter 11, is not ruled out. If it does, in fact, file the application, Genesis will follow the same path taken by cryptocurrency exchange FTX, lending platform Celsius Network, Bitcoin (BTC) miner Core Scientific, and many other companies in the sector.
Genesis wants to ‘preserve customer assets’
According to a spokesperson for Genesis, the company is working with its advisors “to preserve client assets and move the business forward.” Regarding the mass layoffs, Genesis said: “As we continue to face unprecedented industry challenges, Genesis has made the difficult decision to reduce our headcount globally. These measures are part of our ongoing efforts to move our business forward.” It should be noted that this is not the first wave of layoffs. That’s because last year, Genesis laid off 20% of its people, or about 260 people. Additionally, Genesis Chief Executive Michael Moro tendered his resignation as Three Arrows Capital (3AC) suffered liquidations last year.
Three Arrows Capital, the collapse
Crypto hedge fund 3AC had become one of the biggest in the crypto industry. However, the company had a lot of exposure to Terra (LUNA), which collapsed in May 2022. And this caused its bankruptcy and subsequent liquidations. Genesis lost a total of around US$2.36 billion (R$12.6 billion) with the liquidation of 3AC. According to Genesis, the amount corresponds to a loan that the company made to 3AC, but which was not paid by the fund. Then Genesis’ problems intensified with the collapse of FTX in November. The company had made a millionaire loan to Alameda Research, FTX’s sister company, before the collapse. On November 16, as reported by CriptoFácil, Genesis stopped loan originations and redemptions. According to the company, 3AC’s default negatively impacted its liquidity and loan entity Genesis Global Capital. Furthermore, although it bolstered liquidity, the FTX collapse triggered a level of withdrawals that exceeded Genesis’ liquidity: “We have reduced portfolio risk and bolstered our liquidity profile and the quality of our collateral,” the firm said, citing the impact of 3AC. “However, FTX created unprecedented market turmoil, resulting in abnormal withdrawal requests that exceeded our current liquidity.” So, to try to strengthen its finances and to help define its future, Genesis hired Moelis last year. Genesis is owned by crypto conglomerate Digital Currency Group, which also operates asset manager Grayscale Investments, news portal CoinDesk, mining and betting firm Foundry, wealth management firm HQ, among others.
