Speaking at the company’s first bankruptcy hearing, Genesis Holdco LLCSean O’Neal’s lawyer said the crypto lender can exit bankruptcy by the second week of May 2023.
On January 24, 2023, O’Neal said he expects Genesis to resolve creditor disputes by the end of the week without mediation.
Genesis and Accredited Lawyers Close to Consensus
Judge Sean Lane also approved Genesis’ request to pay employees and vendors and said it was not required to publish a list of creditors.
The lender plans to auction off key assets and file for bankruptcy by May 19, 2022. One lawyer representing a group of creditors is optimistic they will reach a consensus to address $1.5 billion in outstanding debt by the end of the weeks.
Although cautiously optimistic, another lawyer represents Gemini and other creditors at the Genesis hearing admitted that there was more work to be done.
Genesis Global Capital suspended customer withdrawals and loan initiatives on November 16, 2022, citing liquidity issues, after major debtors defaulted on loans due to the crypto winter.
Bankrupt hedge fund Three Arrows Capital defaulted on a $2.4 billion loan from the lender’s subsidiary, Genesis Asia Pacific Pte. Ltd, after failed bets on rising cryptocurrencies, forced the hedge fund to liquidate. The lender later filed for Chapter 11 bankruptcy on January 19, 2023. It reportedly owes a minimum of $3.4 billion to its top 50 creditors, including Gemini’s Earn customers.
The lender’s interim CEO, Derar Islim, said earlier this month that he expected a quick bankruptcy process. The company laid off 30% of its workforce January 5, 2023, to prevent bankruptcy.
Former Genesis CB Accused of Misrepresenting Company’s Financial Health
Until recently, Gemini, co-founded by billionaire twins Cameron and Tyler Winklevoss, counted Genesis as a lending partner. Gemini collected an agent fee for helping its Earn return account customers get a 7% return on Genesis loan efforts. Cameron Winklevoss recently wrote two letters to executives at Genesis’ parent company, The Digital Currency Group, asking for action to restore Earnings customers’ funds.
Gemini also accused former Genesis managing director Matt Ballensweig of allegedly misrepresenting Genesis’ financial health to Gemini in July 2022.
Ballensweig, with two other former employees, Reed Werbitt and Martin Garcia, reportedly saw New hedge fund Hunting Hill Digital raised $30 million shortly after Genesis stopped withdrawals in mid-November. Ballensweig and Werbitt left Genesis in September 2022 following a leadership shakeup following the collapse of Three Arrows Capital. The company’s former CEO, Michael Moro, resigned a month earlier.
Fellow Genesis lender BlockFi recently sought approval from a bankruptcy judge to offer significant retention bonuses to prevent a mass exodus of employees after the company files for bankruptcy on November 28, 2022.
yesterday, Bloomberg the lender is reportedly selling $160 million in loans collateralized by about 68,000 mining machines. BlockFi’s business has been hit hard by the fall of the Bitcoin price in 2022, which has put many Bitcoin miners in financial trouble as they try to service loans.
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BeInCrypto has reached out to a company or individual involved in the matter for an official statement on the recent developments, but has yet to hear back.