In 2023, only the strongest and most transparent will survive, especially in the crypto sector: Genesis may really not make it. At risk +300,000 investors.
It is no secret that 2022 has proven to be a difficult year for the cryptocurrency industry, but, what is most worrying, is the amount of companies that have proven capable of dragging millions of investors to the brink.
Today we are faced with a complex reality, where so many (perhaps too many) companies try to jump into Web3 trying to exploit a profitable market to only make their own interests.
However, it turns into a nightmare capable of dragging millions of accounts into the red when it comes to accredited companies (at least on paper) that then end up being overwhelmed by a market larger than themselves that, while they think they know, is eventually capable of bringing them to their knees because of their recklessness.
Genesis is one of those companies that it would be best to watch out for right now, considering the latest revelations and the fundamentals that have seen it take center stage in recent months.
There are several elements to analyze, from the company’s disproportionate debts to the latest SEC complaint. In short, Genesis is sinking and we need to be careful. The risk? Thousands of savers will have to pay for it.
Genesis and Digital Currency Group
It is not news that the crypto-lending company has financial problems. After the collapse of FTX and the funding failures promised by former CEO, Sam Bankman-Fried, Genesis has found itself in more and more trouble.
From loans to Alameda Research to Three Arrows Capital gone up in smoke to the bankruptcy of one of the world’s most renowned crypto exchanges, the company is now sinking.
Owned by Digital Currency Group, which we recall also owns companies such as CoinDesk, Grayscale Investments and Luno, it can no longer pay off its debts, having far too many even for Dcg!
The group is in trouble and there is already a smell of a storm in the air, as was already the case with BlockFi and FTX.
Just think that Digital Currency Group is planning to sell part of its holdings, amounting to $500 million, which would cover banks and crypto projects in at least 35 countries! What do you say, is there cause for concern?
Gemini: $900 million never returned
Beginning in the last months of 2022, the cryptocurrency lending company proved to have more than just a crisis to deal with.
In fact, even before the “SBF” case, the company had a $175 million hole and had already had a $140 million loan from FTX. Unfortunately, it was not enough to solve the problem quickly. Ending up a victim of a domino effect that dragged many others down with it!
Gemini, the Winklevoss twins’ cryptocurrency exchange, was one of the entities most affected by the Genesis meltdown. A $900 million loan to the crypto lending platform, in fact, was never repaid.
Gemini is on the hook, as the money belonged to 340,000 users who now have their deposits blocked due to the ongoing dispute.
Genesis: layoffs and closing departments.
The fall of FTX has triggered a domino effect that seems to have no end.
Genesis Global Trading admits it needs more time to resolve the issue, but no one seems to have it. The excuse? Unstable market conditions.
However, this is not enough to reassure investors, who are increasingly caught up in a chain collapse of frightening proportions!
As if that were not enough, the crypto lender’s reassurances become even more futile. Considering that, after laying off 20 percent of its staff in August 2022, it seems to have laid off an additional 30 percent of employees just in the last few days.
An incontrovertible fate? Probably. Especially if we analyze some of the debts of the DCG company.
Genesis debt: how much is it?
A question of a few billion dollars, trying to be ironic.
Yeah, because, considering the $2.4 billion debt due to the collapse of Three Arrows Capital, the $900 million debt to Gemini, $280 million to the bank Bitvavo, and others yet to be ascertained such as that to the company Donut, we are talking about a figure far higher than Genesis can afford.
A debt in excess of $3.5 billion, impossible to repay anytime soon by the company’s own admission!
This is why some not-so-legal solutions already seem to be making their way in, which even the SEC is investigating.
SEC investigates: illicit securities sales
The latest bad publicity about the Dcg Group crypto lender comes right from the U.S. Securities and Exchange Commission: the SEC.
The accusation seems to be very similar to the one made against Ripple.
In a nutshell, Genesis has been accused, along with partner Gemin of selling unregistered securities heavily punished by regulators.
Liquidity problems are thus greatly exacerbated, amid restitution of ill-gotten gains, penalties, and recovery of anticipated interest.
Chapter 11: Genesis on bankruptcy
Just by the company’s own admission, the situation is not easily and quickly resolved. The crypto lender’s own CEO, Derar Islim, has openly stated that he has been discussing possible bankruptcy with his team.
The only way to move more effectively toward resolving the problems.
Article 11, the so-called U.S. Chapter 11, therefore seems to be Genesis’ next move. Bankruptcy in short now seems to be the only way.