Cryptocurrency lender Genesis has filed for bankruptcy protection in the United States.
The company, along with two of its subsidiaries, Genesis Global Capital and Genesis Asia Pacific, filed petitions under Chapter 11 of the US Bankcruptcy Code in a court in New York, according to a statement late Thursday.
Genesis, which has been facing liquidity issues, is the latest cryptocurrency firm to file for bankruptcy protection following the collapse of FTX last year.
Last November, the company suspended withdrawals within its lending unit. It said that the FTX collapse had spurred a wave of withdrawal requests that exceeded its “current liquidity”.
“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 of Genesis.
“We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution.”
The International Monetary Fund (IMF) has recently warned that digital assets could pose risks to the financial system if regulators don’t act fast and strengthen regulation of the crypto assets industry.
The lender said that the collapse of one of the industry’s largest platforms has already highlighted risks from crypto assets that lack basic protections.
As part of its bankruptcy filing, Genesis calls for a “global resolution of all claims” through the creation of a trust that will distribute assets to creditors.
The company assured that it has more than $150 million in cash on hand which will provide “ample liquidity” to support its ongoing business operations and facilitate the restructuring process.
It said that redemptions and new loan originations in the lending business remain suspended, and that claims will be addressed through the Chapter 11 process.
“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’ advisors as we seek to implement a path to maximise value and provide the best opportunity for our business to emerge well-positioned for the future.”
Last November, following the collapse of FTX, economists at the Bank of International Settlements said that around 75% of people who invested in bitcoin have lost their money.
(Reporting by Cleofe Maceda; editing by Mily Chakrabarty)