Genesis Global Capital has hired investment bank Moelis & Company to explore options, including a potential bankruptcy, The New York Times reported, citing three people familiar with the situation.
There haven't been any final decisions made and it is still possible for the company to avoid a bankruptcy filing, the report said.
Genesis had spent much of November scrambling to raise fresh capital or reach a deal with creditors thanks to its exposure to collapsed crypto exchange FTX. The company's institutional lending unit last week was forced to suspend redemptions and new originations. Genesis also previously disclosed that its derivatives unit had about $175 million in locked funds in its FTX trading account. As a result, parent company Digital Currency Group (DCG) opted to strengthen Genesis’ balance sheet with an equity infusion of $140 million.
DCG is also the parent company of CoinDesk.
Several months ago Genesis reportedly suffered losses of hundreds of millions of dollars due to loans made to failed crypto hedge fund Three Arrows Capital.
Separately on Tuesday, DCG founder and CEO Barry Silbert disclosed in a note to shareholders that DCG had a roughly $575 million liability to Genesis Global Capital, which is due in May 2023.
"In recent days, there has been chatter about intercompany loans between Genesis Global Capital and DCG," Silbert wrote. "For those unaware, in the ordinary course of business, DCG has borrowed money from Genesis Global Capital in the same vein as hundreds of crypto investment firms. These loans were always structured on an arm’s length basis and priced at prevailing market interest rates. DCG currently has a liability to Genesis Global Capital of ~$575 million, which is due in May 2023. These loans were used to fund investment opportunities and to repurchase DCG stock from non-employee shareholders in secondary transactions previously highlighted in quarterly shareholder updates."
Silbert also reminded investors of a $1.1 billion promissory note that is due in June 2032, noting that this was related to liabilities from Genesis related to the Three Arrows Capital default.
"Aside from the Genesis Global Capital intercompany loans due in May 2023 and the long-term promissory note, DCG’s only debt is a $350M credit facility from a small group of lenders led by Eldridge," Silbert wrote. He added that DCG has only raised $25 million in equity capital and is on pace to do $800 million in revenue this year.
UPDATE (Nov. 22, 20:24 UTC): Updated subhead of story and added statements from DCG's Barry Silbert.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.