Crypto lender Genesis files for bankruptcy protection — Financier Worldwide

Anoth­er casu­al­ty of the con­ta­gion spread­ing across the cryp­tocur­ren­cy sec­tor in the wake of the col­lapse of FTX, indus­try pio­neer and dig­i­tal cur­ren­cy prime bro­ker­age Gen­e­sis Glob­al Hold­co, LLC has filed for Chap­ter 11 bank­rupt­cy protection.

As part of its Chap­ter 11 fil­ing, which includes sub­sidiaries Gen­e­sis Glob­al Cap­i­tal, LLC and Gen­e­sis Asia Pacif­ic Pte. Ltd, Gen­e­sis has pro­posed a roadmap to an exit includ­ing a Chap­ter 11 plan that calls for a frame­work for a glob­al res­o­lu­tion of all claims through, and the cre­ation of, a trust that will dis­trib­ute assets to creditors.

Genesis’s oth­er sub­sidiaries involved in the deriv­a­tives and spot trad­ing and cus­tody busi­ness­es and Gen­e­sis Glob­al Trad­ing are not includ­ed in the fil­ing and con­tin­ue client trad­ing operations.

The Chap­ter 11 plan con­tem­plates a dual track process in pur­suit of a sale, cap­i­tal raise or equi­ti­sa­tion trans­ac­tion that would enable the busi­ness to emerge under new own­er­ship. The com­pa­ny will ini­ti­ate a mar­ket­ing and sale process to mon­e­tise assets or oth­er­wise raise cap­i­tal, using the trans­ac­tion pro­ceeds to pay cred­i­tors fair­ly and equitably.

If the mar­ket­ing process does not result in a sale or cap­i­tal raise, cred­i­tors will receive own­er­ship inter­ests in a reor­gan­ised company.

“While we have made sig­nif­i­cant progress refin­ing our busi­ness plans to rem­e­dy liq­uid­i­ty issues caused by the recent extra­or­di­nary chal­lenges in our indus­try, includ­ing the bank­rupt­cy of FTX, an in-court restruc­tur­ing presents the most effec­tive avenue through which to pre­serve assets and cre­ate the best pos­si­ble out­come for all Gen­e­sis stake­hold­ers,” said Der­ar Islim, inter­im chief exec­u­tive of Gen­e­sis. “We deeply appre­ci­ate our clients’ ongo­ing patience and part­ner­ship as we work towards an equi­table solution.”

Along­side the Chap­ter 11 fil­ing, Gen­e­sis and its advis­ers have been engaged in ongo­ing dis­cus­sions with advis­ers to its cred­i­tors and cor­po­rate par­ent dig­i­tal cur­ren­cy group (DCG) to eval­u­ate the most effec­tive path to pre­serve assets and move the busi­ness forward.

To that end, Gen­e­sis has com­menced a court-super­vised restruc­tur­ing process – all aspects of which will be over­seen by an inde­pen­dent spe­cial com­mit­tee of the company’s board of direc­tors – to fur­ther advance these dis­cus­sions and reach a holis­tic solu­tion for its lend­ing busi­ness, which, if achieved, would pro­vide an opti­mal outcome.

Gen­e­sis has more than $150m in cash on hand which will pro­vide ample liq­uid­i­ty to sup­port its ongo­ing busi­ness oper­a­tions and facil­i­tate the restruc­tur­ing process. More­over, the com­pa­ny has filed a num­ber of cus­tom­ary ‘first day’ motions with the court to enable day to day oper­a­tions to con­tin­ue in the nor­mal course.

Act­ing as finan­cial advis­er to Gen­e­sis is Moelis & Com­pa­ny, with Cleary Got­tlieb Steen & Hamil­ton LLP act­ing as legal coun­sel. Alvarez & Marsal is serv­ing as restruc­tur­ing adviser.

“We have craft­ed a delib­er­ate process and roadmap through which we believe we can reach the best solu­tion for clients and oth­er stake­hold­ers,” con­clud­ed Paul Aron­zon, an inde­pen­dent direc­tor at Gen­e­sis. “We look for­ward to advanc­ing our dia­logue with DCG and our cred­i­tors’ advis­ers as we seek to imple­ment a path to max­i­mize val­ue and pro­vide the best oppor­tu­ni­ty for our busi­ness to emerge well-posi­tioned for the future.”

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