Genesis terminating crypto trading services

Crypto Crisis: Lender Genesis Files for Bankruptcy

Genesis has announced plans to put all of its crypto trading operations to a halt. The development came following an announcement to terminate its spot crypto trading operations in the U.S. by the end of this month.

Initially, only its over-the-counter trading platform was planned to cease operations on September 18, 2023. However, in an emailed statement, a Genesis spokesperson explained that its international spot and derivatives trading operations were also closing. The company will stop all trading activities on September 21 at 5:00 p.m. ET, with all accounts being closed on September 30.

“Genesis has decided to stop offering digital asset spot and derivatives trading through GGC International, Ltd. (GGCI). This decision was made voluntarily and for business reasons. With this termination of services from GGCI, Genesis no longer offers trading services through any of its business entities,” the statement reads.

Genesis also reassured its clients, “If you have open derivatives positions with GGCI, these positions will be honoured through expiration, and we will support transactions with you that close or help you manage any such open positions.”

No spokesperson from Genesis itself has explicitly discussed the reasons behind its decision. However, market observers speculated that external factors such as shifting client demand from over-the-counter to decentralized transactions, regulatory uncertainties, or market volatility have influenced the company’s continuous scale-back strategies.

Genesis’ bankruptcy in a troubling year

Genesis, like CoinDesk and Grayscale Investments, is a subsidiary of Digital Currency Group (DCG). Genesis used to be one of DCG CEO Barry Silbert’s largest derivatives trading desks before Genesis Global Holdco filed for bankruptcy in January. Before declaring bankruptcy, Genesis had managed $116.5 billion in spot trading alone.

Genesis’ financial issues began with a legal battle with FTX, Three Arrows Capital (3AC) and Gemini, two of which have already filed for bankruptcy as well.

FTX claimed that Genesis owed the platform $2 billion in debt. According to finance news outlet Finance Magnates, FTX has now agreed to settle its legal dispute with Genesis through a payment of USD $175 million to sister company Alameda Research. Although for a considerably lesser amount, FTX lawyers hope that this will help the company refund its clients.

On January 1, Genesis and Gemini were charged by the Securities and Exchange Commission (SEC) with a complaint centering on the Gemini Earn program, in which Genesis was the main partner.

The SEC claimed that the program had allowed the companies to raise billions of dollars from retail investors whose offers and sales were not registered officially. SEC Chair Gary Gensler claimed that the two companies had bypassed disclosure requirements designed to protect investors.

Later in July, Gemini alleged DCG and Silbert of “encouraging and facilitating” fraudulent activities through Genesis. Gemini founders Cameron and Tyler Winklevoss threatened to sue Silbert to recoup $900 million, but DCG dismissed these claims as having no basis.

Following these developments and a massive layoff, the company applied for bankruptcy protection in New York to reorganize its business.

DCG then announced an arrangement with Genesis in August, which promised creditors they could recover the majority of their funds. The plan suggests that unsecured creditors may receive 70 percent to 90 percent of the owed amount, with in-kind recoveries from 65 percent to 90 percent.

However, several creditor groups, including Gemini, have criticized the plan. As DCG’s lender, they found the agreement quite insufficient, given that Genesis owes a massive $3.5 billion to its top 50 debtors.