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Genesis calls in same restructuring expert as Voyager Digital in effort to avoid bankruptcy

By Raphael Sanis

Edited by Charlie Mellor

10:53, 23 November 2022

The Genesis and FTX logos surrounded by crypto coins
The lending firm Genesis has $175m stuck in the bankrupt FTX exchange – Photo: Shutterstock

Genesis Global Capital, a cryptocurrency lending firm, has hired a restructuring adviser to explore its options, following the company’s exposure to the FTX blowout.

The firm hired Moelis & Company, according to The New York Times, the same adviser who handled Voyager Digital, another crypto lending firm that filed for bankruptcy in July 2022.

This move by Genesis comes as it experiences pressure from the firm’s creditors regarding the $175m worth of assets stuck in the FTX exchange, which filed for Chapter 11 bankruptcy protection earlier this month.

While Genesis has reassured investors this will not impact trading on the platform, it has not ruled out bankruptcy.

“Our goal is to resolve the current situation without the need for filing a bankruptcy,” a spokesman for Genesis told The New York Times.

It was reportedly emphasised by Genesis that it has not taken any financial decisions and a bankruptcy filing is still avoidable.

The Genesis crisis

The Genesis lending firm saw significant vulnerability to FTX’s demise earlier this month as it was a trading partner with the exchange. But since FTX halted withdrawals, $175m worth of Genesis’ assets have been stuck in the exchange.

BTC/USD

65,855.25 Price
-0.100% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

SOL/USD

174.23 Price
-0.460% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

DOGE/USD

0.13 Price
-0.150% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

ETH/USD

3,441.22 Price
-1.290% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

It was this liquidity problem that eventually led to FTX’s downfall, coupled with a collection of other controversies. These included propping up the exchange with its own FTT token and allegedly funnelling customer funds to its trading firm Alameda Research.

FTX announced its bankruptcy on 11 November, along with the resignation of CEO Sam Bankman-Fried. But this has left uncertainty for investors on when and if they will receive their frozen funds back.

Will investors get their funds back?

It is expected to be an uphill struggle for FTX investors to receive their money. There is speculation that users of the exchange will likely not be able to claim collateral rights.

Comparisons are being made with the downfall of the cryptocurrency exchange Mt. Gox in 2014, where investors are still waiting to recover their lost funds.

This means it could be challenging for Genesis to reacquire its invested $175m.

However, in FTX’s bankruptcy press statement, the exchange said it would begin “an orderly process to review and monetise assets for the benefit of all global shareholders”.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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