Genesis creditors seek to avoid bankruptcy

Citing a Bloomberg anonymous source, several Genesis clients hired restructuring advisers to avoid the company’s filing for Chapter 11 bankruptcy.

One group of creditors is currently working with Proskauer Rose law firm, and another is getting advice from Kirkland & Ellis. The information was shared with Bloomberg by an unidentified source close to the matter.

The news was also repeated by Chinese reported Colin Wu in today’s Twitter post, who added:

“Genesis creditors are working with restructuring lawyers to explore options to save the company from bankruptcy, Bloomberg reported. Genesis has previously told its potential investors that it may file for bankruptcy if it cannot raise $500m.”

On Nov. 22, Genesis hired a restructuring advisor Moelis & Company to explore the options, including bankruptcy, due to the difficulty of raising funds for its lending unit. Genesis team officially stated:

“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”

Genesis also stated the goal to raise $1M of fresh capital, seeking Binance’s participation. Binance didn’t want to invest in Genesis due to a potential conflict of interest over Genesis’s business model, and Genesis decided to cut the needed capital in half, seeking $500M.

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The latest Bloomberg report also sheds light on the company’s current financial standing. Genesis has $2.8B in outstanding loans on its balance sheet. The third relates to the parent company, Digital Currency Group (DCG). The latter confirmed that, stressing its obligation to pay it back in 2023.

Related: Genesis is under investigation in the U.S.

As a reminder, Genesis revealed a debt to FTX amounting to $175M in locked funds. DSG then infused $140M equity into its subsidiary. Genesis said to its clients via email:

“While the operation of our lending and trading businesses has not been impacted by recent market events, Genesis has taken steps to strengthen its balance sheet with an additional equity infusion of $140M from our parent company, Digital Currency Group.”

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Genesis was exposed to now-bankrupt 3AC, though the company didn’t disclose the amount of funds lost. CEO Michael Moro said the company mitigated losses related to a failed partner. DSG assumed a part of the liabilities to 3AC to ensure Genesis would continue the operations.