Crypto lender, Genesis, hasin January 2023, becoming the latest casualty from the fall of FTX in November 2022.
— Digital Currency Group (@DCGco) January 20, 2023
In its bankruptcy documents, the Digital Currency Group (DCG)-owned company listed over 100,000 creditors in a ‘mega’ bankruptcy filing with aggregate liabilities ranging from $1.2 billion to $11 billion dollars.
Genesis sister company, Luno, is not in immediate trouble following the events, according to its manager.
“DCG subsidiaries, like Genesis, have always operated as independent companies with their own management teams, financial and risk management protocols, and legal and compliance oversight. Luno is a wholly owned, independent operating subsidiary of DCG.” – Luno SA country Manager, Christo de Wi
Luno’s Savings Wallet product worked in partnership with Genesis as a lending partner for the product. Savings Wallet lets customers deposit cryptocurrencies and earn interest from Genesis loans
The Luno exchange (buying and selling crypto) uses a standard wallet and not the savings wallet. Still, Luno insured the Savings Wallet so when Genesis halted redemptions in November 2022 after FTX crashed, the South African firm could return all customer funds.
This is in contrast to US crypto exchange, Gemini, which has a similar product, the Gemini Earn product, letting customers deposit their crypto for investment by Genesis. When Genesis halted redemptions, Gemini Earn customers couldn’t withdraw their balances, with upto $900 million of Gemini customer funds now in question.
Chapter 11 bankruptcy lets a firm continue operating while trying to work ways to repay creditors. Genesis plans to use the Chapter 11 process to try to sell assets or raise money, with creditors ending up owning the reorganized business if those efforts are unsuccessful, it said in a statement.
With customer funds in question and Gemini threatening to sue, there is the larger threat of Genesis and Luno parent company, DCG, having also to file for bankruptcy in what could have ramifications to all its assets.
“These scenarios are highly speculative and we prefer not to speculate at this stage,” De Wit said. “As a significant participant in the crypto market, however, Luno consistently monitors any events that could have an impact on its business or the market more broadly.”
“In light of Luno’s ownership structure and independence, the business is favourably positioned to navigate uncertainty.”