Myth of Money: Genesis Files for Bankruptcy
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What’s Happening with Genesis?
It has been reported that the crypto lending giant has recently filed for bankruptcy after halting customer withdrawals just two months prior. This is a significant development in the industry as it highlights the ongoing trend of crypto contagion, which has led to the downfall of several high-profile companies including Voyager, Celsius, and FTX.
The company in question, Genesis, is a part of Barry Silbert's crypto conglomerate, Digital Currency Group (DCG), and it filed for Chapter 11 in the Southern District of New York. Prior to filing for bankruptcy, Genesis had been in talks with creditors to restructure the company by offering cash payments and equity in DCG. These efforts were unsuccessful, however, as the dividends for shareholders, including SoftBank's Vision Fund II, CapitalG, Ribbit Capital, GIC, Tribe Capital, and Emory University, had already been suspended by DCG.
The bankruptcy filing lists over 100,000 creditors with aggregate liabilities between $1.2 billion and $11 billion, with major creditors being Gemini, which has a $766 million loan outstanding (largely for its Gemini Earn program), investment firms Mirana and Coincident Capital, and crypto startups Babel Finance and Donut. It's worth noting that the filing did not include other subsidiaries involved in Genesis' derivatives, spot trading, and custody businesses.
Genesis claims that the main cause of the bankruptcy is a "run on the bank," but it also faces scrutiny from the SEC for offering an unregistered securities offering, and is currently involved in a public spat with Gemini.
The Winklevoss twins, who founded Gemini, have threatened legal action against Silbert and DCG on behalf of the 340,000+ Earn users and others who have been affected by the bankruptcy.
This Week By the Numbers 📈
Markets continued their upward momentum his week. Will it last? Monday's stock market opening will be the crucial signal.
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One of the largest US colleges, Texas A&M has begun teaching students about Bitcoin
The adoption of Bitcoin and cryptocurrency courses in classrooms is on the rise, with Texas A&M University becoming the latest college in the United States to offer such a course to its 74,000+ students. Associate Professor Korok Ray of the Mays Business School at Texas A&M announced on January 13th that he will be teaching a course called "Bitcoin Protocol" when the Spring semester starts on January 17th. The course will be offered to students in the College of Engineering and Mays Business School. Professor Ray also mentioned that a follow-up course called "Programming Bitcoin" will be offered, in which students will learn how to create a Bitcoin library from scratch. He also stated that it was a challenging process to get the course approved by the university's curriculum committee, which took months of hard work.
3AC, Coinflex founders collaborating to raise $25M for new claims trading exchange
The founders of the failed crypto hedge fund Three Arrows Capital (3AC), Su Zhu and Kyle Davies, are reportedly seeking to raise funds for a new cryptocurrency exchange in partnership with Coinflex co-founders Mark Lamb and Sudhu Arumugam. According to a pitch deck, they aim to raise $25 million. The proposed exchange is named GTX and the deck suggests that it will focus on buying claims against bankrupt companies. The deck suggests that the current exchange users are selling claims at around 10% of the face value for immediate liquidity or waiting for more than 10 years for the bankruptcy process to finish.
Genesis' Crypto Lending Businesses File for Bankruptcy Protection
Genesis Global Holdco, the holding company for the troubled cryptocurrency lender Genesis Global Capital, has filed for Chapter 11 bankruptcy protection in New York due to the impact of two major industry collapses in 2022. The company and its subsidiaries have filed a trio of voluntary petitions with the United States Bankruptcy Court for the Southern District of New York. Genesis Global Capital estimates more than 100,000 creditors and between $1 billion and $10 billion in liabilities and assets. Genesis owes over $3.5 billion to its top 50 creditors, including crypto exchange Gemini, trading giant Cumberland, Mirana, MoonAlpha Finance, and VanEck's New Finance Income Fund.
Feds seize almost $700 million of FTX assets in Sam Bankman-Fried criminal case
Federal prosecutors have seized nearly $700 million in cash and assets connected to Sam Bankman-Fried, the founder of FTX, primarily in the form of Robinhood shares. John Ray, who replaced Bankman-Fried as CEO, is trying to rescue funds that were lost by the crypto company's depositors when the firm filed for bankruptcy in November. Bankman-Fried was arrested on criminal fraud charges in December and is currently out on a $250 million bond as he awaits trial. The 55 million-plus Robinhood shares are at the heart of a multi-party legal battle between Caribbean litigants, representatives of bankrupt crypto lender BlockFi, Bankman-Fried himself, and FTX's bankruptcy leadership. Prosecutors have alleged that the Robinhood shares were purchased using allegedly stolen customer funds. Bankman-Fried has denied misappropriating customer assets.
Alphabet cuts 12,000 jobs after pandemic hiring spree, refocuses on AI
Alphabet Inc, the parent company of Google, is cutting about 12,000 jobs or 6% of its workforce, as it faces a "different economic reality" according to a staff memo. The company is doubling down on artificial intelligence (AI) and cutting staff who support experimental projects. This is following thousands of layoffs at tech giants such as Amazon, Microsoft, and Meta Platforms, who are downsizing after a pandemic-led hiring spree left them with a surplus of staff in a weak economy. The CEO Sundar Pichai took "full responsibility" for the decisions that led to the layoffs. Despite the job cuts, shares in Alphabet rose 4% on Friday, after falling 30% in the past 12 months, which is similar to the 24% slump in the broader tech industry.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
Tatiana Koffman
About the Author: Tatiana Koffman
Hi there and thanks for reading! If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I write to make financial topics more accessible and create equal opportunity for the next generation of investors. I have personally invested in 20+ companies and funds (my portfolio).
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