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