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Genesis has warned of bankruptcy if it does not get the $1 billion needed to stay afloat, an unwanted consequence following the FTX collapse.
Genesis Trading has warned that it could fall into bankruptcy after failing to raise fresh funds for one of its operational divisions. The crypto giant earlier suspended lending services in a bid to generate new cash for its lending unit.
Although Genesis warns of bankruptcy, the leading over-the-counter (OTC) Bitcoin trading platform plans to remain afloat as long as possible. According to a company representative:
“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 Bankruptcy Likelihood Comes on Heels of FTX Crash
Genesis has weathered a liquidity crunch in light of FTX‘s collapse earlier this month. According to inside sources, the OTC player spent the past few days sourcing over $1 billion in fresh capital. Such efforts included talks with major crypto exchange Binance regarding a potential investment. So far, Genesis is yet to make substantial headway with Binance, or any other potential investor, over funding.
The lending arm of the OTC Bitcoin trading desk froze redemptions last week. This suspension occurred after a separate unit disclosed that Genesis had $175 million locked in its FTX trading account.
Genesis also first shed light on its financial woes last week. On November 16th, the company detailed its troubles on Twitter, citing unusual withdrawal requests from the FTX fallout. Owing to this unpleasant development, Genesis further stated:
“In consultation with our professional financial advisors and counsel, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business.”
At the time, a Genesis spokesperson explained that the company was availing itself of all possible options amid the FTX-triggered liquidity crunch. The spokesperson also said that Genesis was keen on identifying the “best solution and outcome possible for clients.”
Crypto Companies in Tailspin from Liquidity Crunch
Genesis joins a growing list of crypto companies teetering on bankruptcy in the wake of the FTX collapse. The demise of the Bahamian-based crypto exchange sent shockwaves throughout the industry and pushed several crypto businesses into a liquidity crisis. This crisis is due to the marked increase in redemption and withdrawal requests from hundreds of spooked investors across these firms. These investors aim to salvage investments before the perceived crypto contagion hits full force.
Many within the crypto space also closely monitor Genesis’ development as an indicator of the industry’s strength. This is because the significant OTC platform serves as a counterparty to others in the digital asset space. For example, the difficulties at Genesis are attributable to the strain endured by several crypto players, including Gemini’s billionaire owners, Tyler and Cameron Winklevoss.
In addition to the prevalent liquidity problems bedeviling crypto companies, the prices of tokens are also at record lows. For example, leading coin BTC is trading under $16K, which is some way off its all-time high of nearly $70K precisely a year ago.