Cryptocurrency lender Genesis has denied it is close to declaring bankruptcy. The comments come days after the Digital Currency Group-owned lender halted customer withdrawals due to liquidity difficulties.
On Wednesday, November 16, Genesis temporarily suspended withdrawals, citing “unprecedented market turmoil” following the collapse of Sam Bankman-Fried’s crypto empire, FTX. This was a week after the crypto lender had revealed having almost $175 million worth of funds stuck in an FTX trading account.
Genesis Faces Difficulties Securing New Capital
According to reports, which cited people close to the matter, Genesis has spent the past few days trying to raise almost $1 billion in new capital for its lending. However, the crypto investment bank needed help achieving that goal.
As part of that effort, Genesis approached crypto exchange Binance for investment. Still, the flagship crypto exchange quashed the plan on the grounds of a potential “conflict of interest,” according to sources cited in the Wall Street Journal on November 21 post.
The post also reveals that the crypto lender approached private equity firm Apollo Global Management for funding. There has yet to be any report about the appeal from both Genesis and Apollo.
In light of the difficulties mentioned, among others, the crypto lender had sent a warning to investors about the possibility of filing for bankruptcy should the lender fail to secure extra funding. The announcement was worrisome to investors, but the firm has come forward to squash the concern and restore calm among the already spooked user community.
Genesis is not Filing for Bankruptcy
In a Monday email statement, however, Genesis spokesperson said the lender had “no plans” to file for bankruptcy in the immediate future and would seek to resolve the situation “consensually.”
“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without needing bankruptcy filing. Genesis continues to have constructive conversations with creditors.”
Genesis Global Capital is one of the largest crypto lenders on a global scale. Notwithstanding, it was compelled to suspend customer withdrawals last week due to what it said was a liquidity shortage prompted by a spike in withdrawal requests following the implosion of Sam Bankman-Fried’s FTX.
FTX’s collapse was stunning to the whole crypto industry as it was the largest cryptocurrency exchange by market cap, according to data on CoinMarketCap. The crisis triggered allegations of fraud and mismanagement and has since taken the interest of the U.S. Government, Department of Justice, and regulatory bodies like the U.S. SEC and CFTC, and the Bahamian SCB, who are looking into whether SBF or his company violated securities law. Notably, the FTX debacle was at some point compared to the 2008 collapse of Lehman Brothers by crypto venture firm Multicoin Capital.
FTX founder and former CEO Sam Bankman-Fried expressed his regret for filing for bankruptcy protection during an interview with Vox last week. He also accused regulators of failing to protect customers before what seemed to be SBF took back some of his comments. SBF is the subject of an $11 billion class action lawsuit from investors, alongside several celebrities promoting FTX.