Genesis Global Capital has engaged investment bank Moelis & Company to explore strategies for dealing with the recent crypto market downturn, including a possible bankruptcy. The information was published by The New York Times on Tuesday (22). The newspaper interviewed three people familiar with the situation.
No final decision has been made and the company may still avoid filing for bankruptcy, the report said.
Genesis spent much of November struggling to raise new capital or reach a settlement with creditors thanks to its exposure to the collapse of cryptocurrency exchange FTX.
The company’s institutional lending unit was forced last week to suspend redemptions and new client inflows. Genesis also previously disclosed that its derivatives unit had about $175 million in funds blocked in its FTX trading account.
As a result, the company’s parent company, Digital Currency Group (DCG), opted to strengthen Genesis’ balance sheet with a $140 million capital injection.
In June, Genesis reportedly suffered losses of hundreds of millions of dollars due to loans made to bankrupt crypto hedge fund Three Arrows Capital (3AC).
Separately on Tuesday, DCG founder and CEO Barry Silbert said in a note sent to shareholders that DCG has a liability of approximately $575 million to Genesis Global Capital, due in May 2023.
“Over the last few days there have been loan talks between Genesis Global Capital and DCG,” wrote Silbert. “For those who don’t know, in the normal course of business, DCG has borrowed money from Genesis Global Capital in the same way as hundreds of crypto investment firms. These loans were always structured under normal market conditions and priced according to prevailing interest rates.”
Currently, he continued, “DCG has a liability to Genesis Global Capital of approximately $575 million, maturing in May 2023. These loans have been 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 told investors that there is still a $1.1 billion promissory note due in June 2032, citing that it was related to Genesis liabilities associated with the 3AC fund.
“In addition to Genesis Global Capital’s intercompany loans due May 2023 and the long-term promissory note, DCG’s only debt is a $350 million line of credit from a small group of creditors led by Eldridge (holding American),” wrote Silbert. He added that DCG has raised just $25 million in equity capital and is on track to generate $800 million in revenue this year.