The bankruptcy filings for Genesis Global and its related entities show parent Digital Currency Group (DCG) owes its affiliates more than $1.65 billion.
The three entities that filed for bankruptcy protection are holding company Genesis Global Holdco (GGH), lender Genesis Global Capital (GGC) and Genesis Asia Pacific (GAP).
DCG's debt to Genesis includes loans of $575 million due in May of this year and a $1.1 billion promissory note due June 2032, according to a Friday declaration filed with the bankruptcy court of the Southern District of New York (SDNY) from Paul Aronzon, a member of a special committee of the board of directors of GGH, the holding company of the Genesis entities.
DCG is also the parent company of CoinDesk.
The special committee is investigating the lending activities between GGC and DCG in order to determine whether the bankrupt companies have any viable claims against DCG related to these transactions that could help with the restructuring. The probe is being conducted by law firm Cleary Gottlieb Steen & Hamilton LLP – which represents Genesis in the proceedings – led by Lev Dassin, a former Acting U.S. Attorney for the SDNY.
Specifically, the focus of the investigation is: "GGC’s lending of approximately $850 million in unsecured loans to the DCG Entities, the DCG [promissory] note, various transactions that restructured the $850 million in unsecured loans in November 2022, DCG’s purported exercise of a $52.5 million set-off in November 2022, the treatment" of the DCG note by GGC and DCG entities "for accounting and other purposes and related communications with lenders, dividends paid by the Debtors [GGC, GGH, and GAP] to DCG, and other conduct between the DCG Entities and the Company."
The committee is also investigating potential avoidance actions and types of actions concerning DCG entities, Gemini Trust Company, LLC, and other Genesis lenders. An avoidance action means the debtors will look to avoid or nullify certain fund transfers they made before they filed for Chapter 11 protection.
Thursday's filings are the latest in a saga of high-profile collapses that have shaken the crypto industry over the past year, including the Terra implosion and, more recently, the FTX crypto exchange's failure.
Genesis found itself entwined with hedge fund Three Arrows Capital and crypto exchange FTX, both of which later failed. Shortly after FTX's Chapter 11 filing in November Genesis was forced to suspend withdrawals in its lending unit, a major customer of which was Gemini, the crypto exchange owed by brothers Cameron and Tyler Winklevoss. CEO Cameron Winklevoss has since waged a public campaign against Genesis, DCG and its CEO, Barry Silbert.
Prior to the Chapter 11 filings, Genesis had been trying to raise fresh capital or reach a deal with creditors. The bankruptcy papers show the company owed $3.5 billion to its top 50 creditors.
CORRECTION (Jan. 20 17:30 UTC): Genesis was involved directly with Three Arrows Capital, not Terra.
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