By Ketki Saxena
Investing.com – In a not unexpected move, cryptocurrency lender Genesis Global Capital is likely to file for bankruptcy as soon as this week, as per a report by Bloomberg News.
A bankruptcy filing has been expected for several weeks, following Genesis’ mid-November decision to freeze customer redemptions. Gemini Earn, a service that let Gemini's users get yield for lending out their coins through Genesis, had also stopped redemptions.
The firm had also announced to clients on Jan. 4 it was working toward a solution for the troubled borrowing and lending unit but that it needed more time to do so.
Bloomberg had previously reported the crypto lender has been in confidential negotiations with various creditors, following a liquidity crunch as the contagion from FTX - where Genesis held some of its funds - took its toll on the crypto sector.
Genesis Global Trading's derivatives business had $175 million at FTX when it filed for Bankruptcy, at a time when Genesis was already reeling from the collapse of hedge fund 3 Arrows capital.
According to people familiar with the matter, creditors, Genesis and Digital Currency Group, the parent company of Genesis. have exchanged several proposals, but have yet to reach an agreement.
Reportedly, creditors may agree to a forbearance period of between one and two years for most of the payment, in exchange receiving cash payments and equity in DCG.
The worry now is that Genesis’s bankruptcy may also take down DGC, which also owns digital asset manager Grayscale and crypto media site CoinDesk, among others.
According to a Jan. 17 letter to shareholders seen by Bloomberg, DCG had announced to shareholders that it's suspending quarterly dividends in an effort to conserve cash.