Creditors of the troubled crypto broker and lending firm Genesis Global are working with restructuring lawyers to draft a plan to could allow the firm to avoid bankruptcy.
According to a Bloomberg report from Tuesday, the various creditor groups have hired restructuring experts, including from law firms Proskauer Rose and Kirkland & Ellis, to explore options for the company that would keep it out of bankruptcy.
The news outlet cited sources “with knowledge of the situation” who asked not to be identified because of the private nature of the matter.
The new plan reportedly took shape after creditors saw what happened with the crypto exchange FTX, with many of them wishing to avoid a similarly chaotic and costly bankruptcy process for Genesis.
A Genesis spokesperson was quoted as saying that their goal is to “resolve the current situation in the lending business without the need for any bankruptcy filing.”
In addition, the report also cited a letter to clients from Genesis’ interim CEO Derar Islim as saying that the firm has begun talks with potential investors, as well as its largest creditors and borrowers, about ways to boost liquidity.
To help with evaluating strategies and move these negotiations forward, Genesis has reportedly hired advisors at the investment bank Moelis & Co.
Genesis has been trying to raise at least $1bn in fresh capital from investors, and said earlier this month that it may need to file for bankruptcy if it fails to raise enough money. So far, however, no deal has been made.
$2.8bn in outstanding loans
The latest news about the possibility of avoiding a bankruptcy comes after a report earlier in November said Genesis had lent out some $2.8bn to various crypto firms, including large loans to its parent company, Barry Silbert’s Digital Currency Group (DCG).
“We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger,” Silbert wrote in a letter to shareholders at the time. He added that DCG remains on track to post a respectable $800m in revenue this year.
FTX and Three Arrows Capital exposure
Genesis has found itself in a weak position since July this year, when it became known that the firm had “hundreds of millions” of dollars in exposure to Three Arrows Capital, a now-bankrupt major crypto hedge fund, and troubled crypto lender Babel Finance.
The situation became even worse when FTX, which Genesis had $175m deposited on, went bankrupt.
Genesis Global Capital suspended redemptions for clients on November 16, sending shockwaves through the industry and markets. The company said at the time that the FTX collapse had led to “abnormal withdrawal requests which have exceeded our current liquidity.”
Genesis’ parent company, Digital Currency Group, is a major crypto conglomerate with investments in dozens of crypto-related companies. Among its holdings are well-known firms such as Chainalysis, bitFlyer, BitPay, Blockstream, Ledger, Ripple, Coinbase, eToro and Kraken, to name just a few.