The platform has become the latest crypto company to feel the reverberation of the FTX collapse.
Genesis Trading froze customer withdrawals in November 2022 following a liquidity crisis in the wake of the FTX scandal. The company is owned by venture capital firm Digital Currency Group (DCG).
This in turn led to Gemini Earn, run by the Winklevoss twins, to suspend customer withdrawals in January. Gemini Earn is a product offering customers an annual return on their crypto deposits.
“This is a crucial step towards us being able to recover your assets,” Cameron Winklevoss tweeted on Friday to followers. He added that “by seeking the protection of the bankruptcy court, Genesis will be subject to judicial oversight and be required to provide discovery into the machinations that brought us to this point”.
The SEC charged Genesis and Gemini for the “unregistered offer and sale of crypto asset securities through the Gemini Earn lending program” on 12 January.
“Through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors,” the SEC claims.
“An in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders.”
Derar Islim, Interim CEO, Genesis
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Derar Islim, Interim CEO, Genesis. “We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution.”
Genesis Global said it has over $150m in cash which will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process. It added its advisers will continue to evaluate options to advance the process to reach a global resolution.
“We have crafted a deliberate process and roadmap through which we believe we can reach the best solution for clients and other stakeholders,” said Paul Aronzon, an independent director at Genesis. “We look forward to advancing our dialogue with DCG and our creditors’ advisers as we seek to implement a path to maximize value and provide the best opportunity for our business to emerge well-positioned for the future.”
Last year, Genesis extended $130.6bn in crypto loans and traded $116.5bn in assets, according to its website.