Crypto brokerage Genesis, part of Barry Silbert’s Digital Currency Group (DCG), has warned that if it doesn’t hit target in a fresh funding round, it may go bankrupt. Genesis initially sought a whopping $1 billion, but has now slashed its goal in half.
Speaking to Bloomberg, the firm somehow simultaneously maintained that it had “no plans to file for bankruptcy imminently.” Only, things aren’t looking good — and it has a mounting track record of blowing smoke.
During a particularly trying month for the crypto industry, Genesis has flip-flopped in communications so many times it’s hard to keep up. Just a few weeks ago, Genesis assured customers it had the FTX crisis covered. Now, it’s desperate for cash.
So, what happened?
Genesis loses $175M but it’s all good
On November 8, Genesis announced that it had “managed” its lending book, resulting in “no material net credit exposure.” It boldly claimed that it had no exposure whatsoever to “any tokens issued by centralized exchanges.”
But the following day, it declared it sold collateral, providing a loss of about $7 million “across all counterparts, including Alameda [Research].”
The day after, on November 10, Genesis admitted its derivatives business had around $175 million in locked funds on its FTX trading account but that it “does not impact market-making activities.”
Crypto trading arm halts withdrawals
Parent company DCG, valued at $10 billion last year, had to step in on November 11. It injected $140 million in equity into Genesis and made clear that “the operation of our lending and trading business has not been impacted.”
Last week, Protos reported this was simply a lie — the firm’s crypto lending arm Genesis Global Capital proceeded to halt withdrawals, redemptions, and new loan originations. Its final post on Twitter, dated November 16, stated that the market turmoil from FTX led to “abnormal withdrawal requests which have exceeded current liquidity.”
The following day, Genesis announced it needed $1 billion in fresh capital. It reportedly conducted talks with crypto exchange Binance, which briefly considered bailing out FTX. It’s unclear which other doors Genesis is knocking on, but no deals have been struck.
A plan for bankruptcy might help
Fast forward to November 21, just four days later, and the firm is still clinging on to hope. It claimed that if investors didn’t cough up enough in its funding round, it would likely face bankruptcy. Somehow, Genesis then turned around and said it had “no plans” to file for bankruptcy and is still focused on tracking down cash.
“Our goal is to resolve the current situation consensually without the need for any bankruptcy filing,” the firm told Bloomberg on Monday. “Genesis continues to have constructive conversations with creditors.”
An update from the firm is expected in the coming days, but the flimsy reassurances of Genesis aren’t fooling the market. Concern is mounting over the health of DCG, Genesis, and Silbert’s other piece of the empire: Grayscale.
Only, Silbert is not alone. The effects of FTX’s fallout has reverberated industry-wide. Other major dominoes are starting to wobble, including Michael Saylor’s MicroStrategy and Brain Armstrong’s Coinbase. It’s unclear when — and which — pieces will fall, but fall they will.