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- Genesis filed for Chapter 11, Bankruptcy, on January 19, 2023.
- Citing FTX collapse, they had halted withdrawals since November 2022.
- With assets in hand, they are positive about solving the creditor issue and planning on coming out in May 2023.
Another crypto firm Genesis Capital filed for chapter 11 bankruptcy on January 19, 2023, joining the red list of many companies failing in the last few months. However, lawyers from Genesis are very optimistic about the case claiming that the creditors’ issue would be resolved in a week and the company could come out of the bankruptcy proceedings by late May 2023.
Sean O’Neal, Genesis’ lawyer, commented on the initial hearing held on January 23, 2023, at the United States Bankruptcy Court for Southern District of New York (SDNY). The company is confident of resolving creditors’ disputes by the end of the week. If required, a mediator can be requested off of the judge, but,
“Sitting here right now, I don’t think we’re going to need a mediator. I’m very much an optimist.”
Was the Bankruptcy filing required?
On January 19, 2023, Genesis filed for Chapter 11 bankruptcy, nearly two months after they had suspended the withdrawals in November 2022. This decision came in the wake of an uncertain and volatile situation emerging in the market post-FTX collapse.
At the time of filing, the company already had a plan for restructuring with a path pursuing a “sale, capital raise, and/or an equitization transaction.” Meaning that the company could emerge under different management.
Bankruptcy Proceedings
In a standard bankruptcy proceeding, Judge Sean Lane granted some permissions, including payment to their employees and vendors. Moreover, they are not required to reveal customer names on their creditor’s lists. Majorly due to privacy issues, fearing a phishing scam if the names are revealed. The company plans to auction its assets and exit the proceeding by May 19, 2023.
Can they pay off the creditors?
Reports suggest that they have over $5 billion in assets and liabilities, & owe $3.4 billion to nearly 100,000 creditors. The decision to halt the withdrawals badly affected the users of a yield-bearing product called the Earn program from Gemini Exchange. While Gemini, Genesis’s largest creditor, is owed approximately $766 million.
The Digital Currency Group (DCG), the parent company, owes Genesis nearly $1.65 billion, which includes $575 million of loans due in May. Although the parent company is going through some tough times, the bankruptcy is not expected to impact them much. Moreover, certain entities of Genesis were not part of the proceedings, including handling derivatives, spot trading, broker-dealer, and custody still operate.
If the data be believed and adjoining factors considered, there is a chance that Genesis might come out of this mess real soon. But with the nature of the industry and the dangerous maze it is, nothing can be said for sure.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
