Genesis Global Trading, a subsidiary of the Digital Currency Group (DCG), has filed for bankruptcy after being charged by the US Securities and Exchange Commission (SEC) for illegal crypto sales. The company, which was originally established as a platform for large-scale Bitcoin trading, has been facing financial difficulties, leading to the layoff of 30% of its staff. The bankruptcy of Genesis is linked to the previous bankruptcy of FTX, which occurred last November amidst accusations of fraud. In a statement, the interim CEO of Genesis, Derar Islim, said they are planning to engage in dialogue with DCG and creditors to find a way to maximize value and position the company for future success.
The bankruptcy filing of Genesis Global Trading, a subsidiary of the Digital Currency Group (DCG), is linked to the collapse of another crypto firm, Three Arrows Capital, which went bankrupt in June last year. Genesis had claimed that it was owed $1.2bn by Three Arrows, which had been brought down by the failure of cryptocurrencies Luna and TerraUSD in May. This is the latest in a series of blows to the crypto industry, which has been referred to as the “crypto winter” due to the decline in the value of cryptocurrencies.
Additionally, Genesis is currently involved in a high-profile dispute with Gemini, owned by Cameron and Tyler Winklevoss, over $900m in assets that were deposited by Gemini customers. The product, known as Gemini Earn, was marketed as a way for investors to earn up to 7.4% interest on their cryptocurrency holdings. However, since November, 340,000 Earn users have been unable to access their funds due to the volatility in the crypto markets and halted withdrawals by Genesis.
Last week, the SEC accused both Genesis and Gemini of illegally selling crypto assets to investors. The Winklevoss twins have stated that they intend to defend the action, but DCG has not yet made a comment. Shortly after Genesis filed for bankruptcy, Cameron Winklevoss tweeted about the matter.
8/ We also believe that — in addition to owing creditors all of their money back — Genesis, DCG, and Barry owes them an explanation. Bankruptcy court provides a much-needed forum for that to happen. Sunlight is the best disinfectant.
— Cameron Winklevoss (@cameron) January 20, 2023
The bankruptcy filing of Genesis Global Trading, is another setback as the company continues to feel the impact of the collapse of FTX. The founder of FTX, Sam Bankman-Fried, is facing accusations of fraud after allegedly redirecting funds deposited by customers on his platform to Alameda, a hedge fund, without authorization. In December, Bankman-Fried, who is 30 years old, was extradited from the Bahamas, where FTX was based, to the US where he pleaded not guilty to charges of defrauding customers and investors. He was released on a $250 million bail and denied the accusations.