Genesis Global Holdco (GGH), the parent company of struggling crypto brokerage Genesis, has filed for bankruptcy protection.
This comes as part of strategic actions to achieve a global resolution to maximise value for all clients and stakeholders, as well as strengthen its business for the future, it said.
Genesis and its advisors have been holding discussions with advisors to its creditors and parent company Digital Currency Group (DCG) to evaluate the most effective path to preserve assets and move the company forward.
Earlier in the week, it was reported that Genesis owes over $3bn to creditors. To tackle this, DCG is looking to sell assets in its venture portfolio to raise money. Genesis has also recently cut 40% of its workforce and shut its wealth management business to reduce costs.
Following discussions with the advisors, Genesis has commenced a court-supervised restructuring process, which it hopes can provide an optimal outcome for Genesis clients and Gemini Earn users.
As part of this, Genesis Global Holdco and two of its lending business subsidiaries, Genesis Global Capital and Genesis Asia Pacific filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
The other subsidiaries of Genesis that are involved in the derivatives and spot trading and custody businesses and Genesis Global Trading are not included in the filing and continue client trading operations.
As part of its Chapter 11 filing, Genesis has a proposed roadmap to an exit including a Chapter 11 plan that calls for a framework for a global resolution of all claims through, and the creation of, a trust that will distribute assets to creditors.
This plan contemplates a dual track process in pursuit of a sale, capital raise and equitization transaction that would allow the business to emerge under new ownership. The company will initiate a marketing and sale process to monetise its assets or otherwise raise capital, using the transaction proceeds to pay creditors fairly and equitably.
If this does not result in a sale or capital raise, creditors will be given ownership interests in Reorganised GGH.
Genesis Interim CEO Derar Islim said, “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.
“We deeply appreciate our clients’ ongoing patience and partnership as we work towards an equitable solution.”
The restructuring process is being overseen by an independent special committee of the company’s board of directors.
Genesis has over $150m in cash on hand, which it hopes will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process.
Moelis & Company is serving as GGH’s financial advisor, and Cleary Gottlieb Steen & Hamilton is acting as legal counsel. Alvarez & Marsal is serving as restructuring advisor.
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