Last week, cryptocurrency lender giant Genesis filed for bankruptcy in the US, making it the largest crypto industry demise since FTX.
The company along with its subsidiaries, Genesis Global Capital and Genesis Asia Pacific, filed for Chapter 11 protection in the Southern District of New York, according to court documents.
Genesis Global Capital said it had between $1bn to $10bn in both assets and liabilities along with more than 100,00 creditors. It is understood that the top 50 unsecured claims amounted to around $3.4bn; Genesis allowed its customers to gain interest on all of their crypto deposits.
It comes after the crypto lender found itself on the wrong side of the great crypto collapse last year, with unfortunate lending decisions leaving them in deep financial trouble.
The first came in July, when Three Arrows Capital turned to dust, taking $1.2bn of the $2.36bn it had borrowed from Genesis.
Then, later that year, FTX hit the hay with $175m loaned money from Genesis.
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This led to Genesis freezing withdrawals to retain some of its remaining assets, blocking out worried customers desperately attempting to reclaim their deposits.
Genesis parent company, mass crypto asset company Digital Currency Group (DCG), had also taken out hundreds of millions of dollars in loans from Genesis.
In an escalation to matters on Friday, Cameron Winklevoss, founder of the cryptocurrency exchange Gemini which sits on top of Genesis’ platform, threatened to sue the owner of Genesis after claiming his customers had been “duped” into making deposits.
Barry Silbert, DCG’s founder and chief executive, is currently in a tumultuous legal battle with Winklevoss, whose customers have lost $900 of funds they trusted with Genesis, The Telegraph reported.
Genesis filing for bankruptcy has caused a lot of issues for a lot of people within the crypto industry, but some experts have tried to see a positive in all of the negativity.
“While the fallout will be rough, the bankruptcy will go a long way towards breaking the chain of lending created by 2021’s bull market,” Suneet Muru, Analyst at Thematic Intelligence Team at GlobalData, a leading data and analytics company, told Verdict, “the industry won’t be able to properly focus on building up again until this is flushed out, but it will take a long time.”
A crypto bull market is widely defined as a time when the market is experiencing sustained or substantial growth.
Sara de la Torre, Head of Financial Services and Insurance, NCC Group, said: “The crypto market will stay. The latest market dynamics do not show the end of it, but rather the beginning of a bear market that will turn into another boom throughout the year.”
However, Muru believes that more shockwaves could be inbound.
“Genesis is one of five subsidiaries of Digital Currency Group (DCG),” he said, “it is highly likely that DCG will be forced to sell assets to try and plug this multimillion-dollar hole.
“If this happens, it will send shockwaves throughout the industry on an unprecedented scale.”
GlobalData is the parent company of Verdict and its sister publications.