Sources: Genesis struggles to raise $1B+ funding for its lending unit and warns potential investors that it may need to file for bankruptcy if its efforts fail

Digital-asset brokerage Genesis is struggling to raise fresh cash for its lending unit, and it's warning potential investors …

Bloomberg 2022-11-22

Context & Ripple Effects

Genesis's funding warning was an early sign that stress in its lending unit was becoming a parent-company problem: DCG subsequently sought capital to avoid a Genesis bankruptcy and later explored venture-asset sales as Genesis's creditor obligations came into focus. The threatened filing ultimately materialized in Genesis Global Capital's Chapter 11 case, making the failed raise the opening stage of a longer restructuring.

First-order effects

Genesis's lending unit faces an immediate liquidity test: prospective investors must decide whether to supply more than $1 billion despite the stated bankruptcy risk.
DCG is exposed to the lending unit's funding gap because preserving Genesis outside bankruptcy requires financing rather than an insolvency process.

Second-order effects

DCG's later capital-raising effort and consideration of venture-asset sales show how Genesis's shortfall shifted pressure from the lender's balance sheet to its parent's assets.
Genesis creditors gain leverage as an out-of-court funding solution weakens, a dynamic reflected in later reporting that the broker owed creditors more than $3 billion.

Third-order effects

The progression from emergency fundraising to Chapter 11 indicates that crypto-lending failures can move quickly from liquidity support negotiations into court-supervised creditor recoveries.
Genesis's later effort to recover loans from DCG suggests that, when affiliated crypto firms share funding links, restructuring can turn parent-subsidiary balances into contested creditor assets.

The trend: Crypto-lending stress is increasingly being resolved through parent-level asset support and, when that fails, bankruptcy processes that unwind intercompany obligations.

Discussion

@gemini @gemini on x
1/5 Update for Earn customers: we continue to work with Genesis Global Capital, LLC (Genesis) — the lending partner of Earn — and its parent company Digital Currency Group, Inc. (DCG) to find a solution for Earn users to redeem their funds.
@fintechfrank Frank Chaparro on x
Sources tell The Block crypto trading firm Genesis—which has been struggling to raise emergency capital to shore up its lending unit's liquidity profile—has slashed its raise target from $1bn to $500 million. As Bloomberg reported, it faces potential bankruptcy w/o funding.
@tier10k @tier10k on x
[DB] Genesis Has Slashed Its Raise Target From $1bn to $500 Million: The Block
@fintechfrank Frank Chaparro on x
Genesis: “We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”
@tier10k @tier10k on x
[DB] Crypto Lender Genesis Asks Binance and Apollo for Cash: WSJ Binance Decided Not to Invest, Fearful That Some of Genesis's Business Could Create a Conflict of Interest Down the Line: Source: BBG
@tier10k @tier10k on x
[DB] Genesis Says Have No Plans to File Bankruptcy Imminently After Report Suggested That Crypto Firm Warned Investors of Bankruptcy - Statement: RTRS
@tier10k @tier10k on x
[DB] Apollo Said Unlikely to Participate in Genesis Fundraising: BBG
@cryptocred @cryptocred on x
Genesis Timeline November 8: “No material net credit exposure” November 9: We lost $7M November 10: Okay, we have $175M locked in FTX November 16: Sorry, no withdrawals or new loans November 17: Okay, we need $1BN November 21: We'll go bankrupt without the money 👍
@silvermanjacob Jacob Silverman on x
“imminently” seems key here. Is Friday imminent? https://twitter.com/...
@ramahluwalia Ram Ahluwalia on x
1/ Genesis today notes their goal is to ‘resolve the current situation consensually’ via ‘constructive conversations with creditors.’ This is a high-stakes gambit and looks like a lose lose situation. But Gemini Earn users could wind up owning Genesis (users = owners :) 🧵
@sonalibasak Sonali Basak on x
*APOLLO SAID UNLIKELY TO PARTICIPATE IN GENESIS FUNDRAISING
@adamscochran Adam Cochran on x
Hmm damn my analysis did not factor in the possibility that the bad debt could have been loaned to dcg and used to buy GBTC, that's one of the few scenarios that would make it so much worse. https://twitter.com/...
@chahalvermaa Chahal on x
CZ (Binance), Winklevoss Twins (Gemini), Mike Novogratz (Galaxy Digital) all have refused to invest. https://twitter.com/...
@arkloster Festive Holiday Kloster on x
I would definitely bail out genesis— probably the best prog-rock synth band of the 80s. https://twitter.com/...
@bleeding_crypto @bleeding_crypto on x
They are desperately trying to save Genesis. If no one comes through there's going to be a massive selloff. It's hard to imagine that anyone wants to lend them $500 million and take on their debt. https://twitter.com/...
@ap_archpublic Andrew on x
UPDATE: ‘drop dead’ date for Genesis bankruptcy decision is Wednesday. The previously undisclosed $1.1B promissory note from Genesis to DCG still exists. Lack of liquidity and loan losses at Genesis still exists. Reg M redemptions at Grayscale still being considered.
@petergleick @petergleick on x
The definition of a Ponzi scheme is it constantly needs new suckers to support the previous ones, and it always collapses when they aren't available. https://twitter.com/...
@tradermayne Mayne on x
Slashed its raise like it's a Black Friday sale or something. https://twitter.com/...
@hsakatrades @hsakatrades on x
Crypto Firm Genesis Warns of Bankruptcy Without New Funding: BBG Genesis Was Said to Have Discussions With Binance on Investment: BBG Genesis Talks for Fresh Cash Over Weekend Failed to Materialize: BBG https://twitter.com/...
@mikealfred Mike Alfred on x
I will repeat this once more for emphasis: Genesis is working on a restructuring that hopefully won't involve bankruptcy. DCG owns 100% of Genesis and Grayscale. Neither DCG or Grayscale will be forced to file as a result of a potential Genesis bankruptcy. Not that complex tbh.
@kadhim @kadhim on x
No plans to file bankruptcy 👍 ... imminently https://twitter.com/...
@doombergt @doombergt on x
Always a great sign https://twitter.com/...
@cmsholdings @cmsholdings on x
Early halvening https://twitter.com/...
@ogdfarmer @ogdfarmer on x
This just out, and we're kinda shrugging it off. Either we're about to teleport to 0 or we just bottomed. I have frankly have no clue which one. https://twitter.com/...
@monkeycharts Monkey Rothschild on x
FTX - cash fucking cow generating trading fees - bankrupt 3AC - got priority on all early stage investments in one of the most outrageous bull markets ever - bankrupt Genesis - near monopoly on US derivs & major OTC flow - about to be bankrupt how the fuck
@ellebeyoud Lydia Beyoud on x
Scoop: Crypto brokerage Genesis is having trouble raising at least $1B in funds to stave off a liquidity shortfall. Bankruptcy a possibility. Talks with Binance over a deal fell through. More on @theterminal, with @sonalibasak @VildanaHajric & @MuyaoShen https://twitter.com/...
@biancoresearch @biancoresearch on x
*CRYPTO FIRM GENESIS WARNS OF BANKRUPTCY WITHOUT NEW FUNDING They have been desperately trying to find new funding since last week. Only no, including Binance. They are not magically going to find a yes in the next few days. BTC back to a two-year low, Under $15,650 https://twitt…
@sonalibasak Sonali Basak on x
Genesis has told investors it could need to file for bankruptcy as it seeks funds for its lending unit It's been seeking >$1 billion, including talks with Binance, but talks have so far failed to materialize w/ @ElleBeyoud @VildanaHajric @MuyaoShen https://www.bloomberg.com/...
@billcorbett Bill Corbett on x
yeah me too, I will be out of money eventually if people don't give me more money #crypto https://twitter.com/...
@ercwl Bearica Wall on x
the blood gods already stated that ftx/sam was the final sacrifice PULL THROUGH GENESIS. PULL THROUGHHHHH https://twitter.com/...
@canteringclark Clark on x
Anyone want to pool some funds? Dibs on rename to Sega. https://twitter.com/...
@kylesgibson @kylesgibson on x
they need a loan... for their loan making business https://twitter.com/...
@lisaabramowicz1 Lisa Abramowicz on x
The crypto meltdown is on the brink of claiming another victim: https://twitter.com/...
@hodlkryptonite @hodlkryptonite on x
Ok I guess this means they really are gg bankrupt. https://twitter.com/...
@northrocklp Hal Press on x
This is also extremely bullish if true. 500mm should definitely be doable. https://twitter.com/...
@wublockchain Wu Blockchain on x
WSJ: Binance decided not to bail out Genesis, fearful that its business could create a conflict of interest down the line. Genesis has lowered target from $1b to $500m. DCG is reluctant to sell such as Grayscale in support. Genesis could go bankrupt if it cannot raise funds.
@jasoneburack Jason Burack on x
The tide is going out... https://twitter.com/... https://twitter.com/...
@adamscochran Adam Cochran on x
Friendly reminder, if Barry sells anything, then he is likely to need to actually sell a lot of things. Any crack in the empire is a bigger hit than the surface will present. https://twitter.com/...
@asvanevik Alex Svanevik on x
for once we actually need a DAO https://twitter.com/...
@0xfoobar @0xfoobar on x
well if genesis isn't gonna go bankrupt, i have no choice but to resume fudding tether did you know they admitted to “learning to bank like criminals?”
@0xfoobar @0xfoobar on x
if genesis can't stay solvent while making hundreds of millions of dollars of profit off regulatory arbitrage, they should probably just go bankrupt
@marionawfal Mario Nawfal on x
“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.” - Genesis Should we now be questioning the health of DCG?
@adamscochran Adam Cochran on x
Yeah, nothing convinced investors like suddenly slashing your raise target... https://twitter.com/...
@mdudas Mike Dudas on x
Translation: someone stepped in to staunch the bleeding https://twitter.com/...
@jnicholsonindc Jonathan Nicholson on x
So, about those currencies not backed by unreliable fiat money... https://twitter.com/...
@julianhosp Dr. Julian Hosp on x
Where are the other 500m from? Exactly. The wallets you are not supposed to see, but trust. 🎩 https://twitter.com/...
@marionawfal Mario Nawfal on x
🚨 Gemini states they are working with Genesis and DCG to find a solution for users' funds in Earn to be returned. If Genesis goes under this won't be much of a lifeline. 😬 https://twitter.com/...
@tier10k @tier10k on x
https://twitter.com/... https://twitter.com/...
@lucasmtny Lucas Matney on x
Oh man, what a company statement https://www.bloomberg.com/... https://twitter.com/...
@andy8052 Andy on x
Ok hear me out > be genesis > need a lot of money > short the fuck out of crypto > pretend you're infected by contagion worse than you are > say you're going bankrupt maybe > close shorts > long crypto > “nvm we are good!” > close longs
@silvermanjacob Jacob Silverman on x
So Genesis provides liquidity for Grayscale but Genesis may go bankrupt this week. (Article is from October) https://cointelegraph.com/...
@coffeebreak_yt @coffeebreak_yt on x
Genesis is in deep trouble. Balance sheet is atrocious. Constantly lying to investors. Bear market no sign of turning. Why would anyone invest in this? https://twitter.com/...
@napgener @napgener on x
Grayscale funds are safu, but heres what is next: lenders and depositors to genesis are shrekt. genesis bankrupt now means cryptoDOT CON and other retail facing yield engines wont be paid back by genesis and soon will be rekt they put client funds into genesis >> gbtc
@_tolks @_tolks on x
okay so following the path of other recent companies they'll be filing for bankruptcy tomorrow morning https://twitter.com/...
@dogetoshi Steven on x
Genesis has a $1B hole that they're trying to raise for. Spoke to Binance and couldn't get a deal done. Seems suspicious considering CZ casually spent $500M on Twitter. Has to be more than a simple $1B hole.
@hsakatrades @hsakatrades on x
@tier10k Barry trying to pull Genesis out of Bankruptcy by pushing these headlines and trading around it.
@whalecointalk @whalecointalk on x
things escalated pretty quick...👀 https://twitter.com/...
@theskyhopper @theskyhopper on x
Any wholesale deal will have to include this cherry of Grayscale Management Fees. Everyone will balk at anything without it IMHO. https://twitter.com/...
@grayscale @grayscale on x
6) Coinbase frequently performs on-chain validation. Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure.
@grayscale @grayscale on x
[NEW TODAY] Due to recent events, investors are understandably inquiring deeper into their crypto investments. In this thread we've compiled additional information about the safety and security of the assets held by our digital asset products. https://grayscale.com/... 🧵
@twobitidiot @twobitidiot on x
Fiction: + Grayscale trust assets aren't accounted for + DC is working to ban crypto + Contagion is just getting started Fact: + Most crypto lenders have been wiped out + SEC won't approve a spot ETF under Gensler (sorry GBTC holders) + Scrutiny will turn to Binance & Tether
@grayscale @grayscale on x
4) All digital assets that underlie Grayscale's digital asset products are stored under the custody of Coinbase Custody Trust Company, LLC. Read more from @Coinbase's CFO Alesia Haas, and CEO of Coinbase Custody Aaron Schnarch: https://twitter.com/...
@twobitidiot @twobitidiot on x
Guys - I'll say this one more time. All Grayscale trust assets are at Coinbase and untouchable. If they were touched, it would be fraud by Coinbase, Grayscale, and negligence by both companies auditors. The assets are there. It's the rest of the trust structure that is broken.
@freemrktcptlst @freemrktcptlst on x
Grayscale is the final boss ... https://twitter.com/...
@nategeraci Nate Geraci on x
Some questions swirling around GBTC & the underlying bitcoin... Here's what Grayscale says: “No other entity, including DCG, Genesis, nor any other Grayscale affiliate, has any control over the digital assets underlying the Grayscale products.” https://grayscale.com/... https://t…
@hodlkryptonite @hodlkryptonite on x
1/n - Prediction - DCG will choose to unwind GBTC and send in 600k of BTC into the market for sale
@shaughnessy119 Tommy Shaughnessy on x
It's MIND blowing how FTX and DCG fumbled unmatchable leads - Grayscale $100m's in AUM fees and investors literally locked in. Trading down due to Genesis attachment - Alameda having direct access to FTX trading data and a no liquidation account + lost $Bs Issue = greedy risk
@hodlkryptonite @hodlkryptonite on x
Given that DCG actually owns ~67m shares of GBTC, unwinding GBTC actually raises them 1B. This actually tilts the calculus towards unwinding GBTC vs trying to find a suitor for selling Grayscale to https://twitter.com/... https://twitter.com/...
@simondixontwitt Simon Dixon on x
THIS MAY NOT AGE WELL. Im not worried about @Grayscale even if @GenesisTrading or @DCGco files. If #Bitcoin in @Grayscale was leveraged then it's a controversy as big as MF Global (Which did happen) - @DCGco will be an easy Chapter 11 as private equity rich. NOT INVESTMENT ADVICE…
@santiagoaufund @santiagoaufund on x
Wasn't part of the blockchain revolution going to be the ability to provide transparency and verification in a safe, secure and immutable format? https://www.cnbc.com/...
@hodlkryptonite @hodlkryptonite on x
11/n - However, given that they own close to 67m~ of GBTC - By dissolving GBTC - they can get ~1B at current prices. Of course the market would nuke down to probably 8k, with an avg sale price of ~12k? That would get them 750m. More than a 500m bid on Grayscale biz https://twitte…
@schuldensuehner Holger Zschaepitz on x
If you are in trouble, double! Cathie Wood has been scooping up shares of crypto exchange Coinbase in wake of FTX's collapse. Recent shopping spree has boosted Ark's holdings to 4.7% of Coinbase's outstanding shares. Ark also bought Grayscale Bitcoin Trust https://www.bloomberg.c…
@bitfinexed @bitfinexed on x
I'm stealing this. It's cute that people calling bullshit on Grayscale refusing to show the Bitcoin reserves, but also claiming everything is cool with Tether refusing to show reserves or perform audits for five years plus now. https://twitter.com/... https://twitter.com/...
@hodlkryptonite @hodlkryptonite on x
14/n - By selling Grayscale, he will give away the crown jewel to someone else for LESS money. By unravelling GBTC, he can get the money that he needs and restart this. The incentives are clear
@peckshieldalert @peckshieldalert on x
#PeckShieldAlert Shares in Grayscale's Bitcoin Trust Trade at 45.08% Discount to Fund's NAV as of November 18, 2022 https://twitter.com/...
@ltcfoundation @ltcfoundation on x
In a recent on-chain validation of @Grayscale's Litecoin Trust, @coinbase performed a cryptographic Proof-of-Reserve to confirm that they are indeed holding LTC (OTCQX: LTCN) in the amount of 1,534,087.9 #Litecoin as of the published date. https://grayscale.com/...
@silvermanjacob Jacob Silverman on x
So does Grayscale have the bitcoin it claims? Feeling very trustless here.
@twobitidiot @twobitidiot on x
I am rooting hard for DCG. Because I'm rooting for the hundreds of thousands of investors who would be hurt if Genesis, Grayscale, DCG don't execute a successful restructuring. We're all in the same boat right now.
@dylanleclair_ @dylanleclair_ on x
$GBTC -7.07%
@btc_archive @btc_archive on x
Coinbase performs regular “on-chain validation” to confirm existence and security of exact amount of #Bitcoin https://twitter.com/...
@miyuki__eto @miyuki__eto on x
gbtc stands for good btc so that means everything is fine because its good

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