Cryptocurrency lender Genesis Global Capital and Genesis Global Holdco and another subsidiary have filed for bankruptcy from Chapetr 11 in New York, as widely expected. The company is a victim of the FTX collapse. That’s because it made large loans to Alameda, the market maker and hedge fund at the center of FTX’s failures. It also took a $1.2 billion loss from the collapse of Three Arrows Capital (3AC) in early 2022.

However, crypto custody and commercial weapons are not part of the bankruptcy proceeding.

According to a statement, the Chapter 11 companies aim to carry out “a sale, capital increase and/or securitization transaction.”

The Chapter 11 filing for Genesis Global Capital states that it has between $1 billion and $10 billion in assets and liabilities and 100,000 clients. It is known that 340,000 Gemini Earn customers had Genesis accounts.

There has been a high-profile feud with the Winkelvoss brothers, who own Gemini. That’s because Genesis ran the Gemini Earn program and Gemini clients are unable to get $900 million of their funds back after Genesis Global Capital halted withdrawals two months ago.

The SEC is suing both Gemini and Genesis over their lending activities, which it says is an unregulated securities offering that has caused clients losses.

“While we have made significant progress in refining our business plans to address liquidity issues caused by recent extraordinary challenges in our industry, including the Three Arrows Capital default and the FTX bankruptcy, a restructuring in court files the most effective pathway through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” said Derar Islim, interim CEO of Genesis. “We deeply appreciate our clients’ continued patience and cooperation as we work toward an equitable settlement.”

Genesis says it has more than $150 million in cash. The group is a subsidiary of Digital Currency Group (DCG) which is run by Barry Silbert. DCG has been a prolific investor in the blockchain, crypto and web3 sectors for years and owns other high-profile organizations such as asset manager Grayscale and Coindesk, which is reportedly up for sale.

Following the collapse of 3AC, DCG issued a $1.1 billion IOU to Genesis to fill the balance sheet hole. Additionally, DCG borrowed $527 million from Genesis Capital prior to May 2022, which is still outstanding.

Crypto Lenders: An Annihilation in the United States

Few major crypto lenders remain, particularly in the United States. Voyager and Celsius filed for bankruptcy following the 3AC failure in May 2022, though the trigger for Celsius arguably wasn’t 3AC. BlockFi went bankrupt after FTX collapsed. And this month, it was announced that Bulgarian authorities had opened a major investigation into Nexo, which was also fined $45 million by the SEC yesterday. Under the SEC settlement, it agreed to stop selling unregistered securities to US investors.