Prominent crypto firm Genesis Global Trading — which had major ties to Sam Bankman-Fried’s now-defunct hedge fund Alameda Research — is now weighing the possibility of filing for bankruptcy after cutting 30% of its staff, The Wall Street Journal reported Thursday, citing anonymous sources familiar with the matter.
The sweeping layoffs hit departments across the company, and Genesis is in talks with investment bank Moelis & Company regarding its next moves, according to the WSJ. Genesis took heavy losses in the past year after both Alameda Research — which collapsed alongside crypto exchange FTX in November amid allegations that the two companies were involved in a scheme by founder Sam Bankman-Fried to siphon billions from customers — and hedge fund Three Arrows Capital filed for bankruptcy. (RELATED: Alleged Fraudster And Ex-Billionaire Sam Bankman-Fried Enters Not Guilty Plea In New York Court)
“As we continue to navigate unprecedented industry challenges, Genesis has made the difficult decision to reduce our headcount globally,” a Genesis spokesperson told the Daily Caller News Foundation. “These measures are part of our ongoing efforts to move our business forward. We sincerely appreciate the hard work of our talented and dedicated team as we continue to work to identify the best outcome for Genesis’s business, clients and employees for the long-term.”
The company previously cut 20% of its staff after Three Arrows, a hedge fund that Genesis had loaned $2.4 billion dollars, filed for bankruptcy, prompting the resignation of then-CEO Michael Moro, according to the WSJ. After the collapse of FTX, Genesis — which had loaned hundreds of millions to Alameda Research — halted loan redemptions and applications for new loans on Nov. 16.
DCG did not borrow $1.675 billion from Genesis
DCG has never missed an interest payment to Genesis and is current on all loans outstanding; next loan maturity is May 2023
DCG delivered to Genesis and your advisors a proposal on December 29th and has not received any response
— Barry Silbert (@BarrySilbert) January 2, 2023
The company has been attempting to raise cash to cover its losses, but some investors have expressed concern about the close ties between Genesis and other entities in the Digital Currency Group (DCG), headed by Barry Silbert, according to Bloomberg. Genesis is the leading subsidiary of the DCG, as are crypto asset manager Grayscale Investments, crypto-focused news outlet CoinDesk and crypto exchange Luno, among other crypto and financial management firms, according to the WSJ.
The decision to halt loan redemptions left roughly $900 million in assets from crypto exchange Gemini trapped in limbo, according to the WSJ. Founder Cameron Winklevoss accused Silbert of engaging in “bad faith stall tactics” to avoid returning money to Gemini’s clients, and alleged that DCG inappropriately loaned $1.675 billion to Genesis, in a letter published on Twitter on Jan. 2.
Silbert denied the allegations in a tweet the same day. Two days later, on Jan. 4, the company posted a “Capital Update” thanking customers for support throughout a “very turbulent 2022,” and stressed that its derivatives and spot trading businesses remained “fully operational.”
“We remain focused on finding a solution for our borrowing and lending intermediation business and reaching the best outcome for all affected clients,” the company wrote. “We continue working with our advisors, in collaboration with DCG and advisors appointed by various client groups, to evaluate options to preserve client assets and move the business forward.”
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