Genesis, another beleaguered cryptocurrency company, has filed for Chapter 11 bankruptcy, confirming that it is insolvent.
The news comes as the company faces legal challenges from regulators in the US, including the US Securities and Exchange Commission.
Genesis’ bankruptcy follows an announcement earlier in January that it would be reducing its workforce by 30%, shrinking to just 145 employees.
Genesis interim chief executive Derar Islim has released a statement in which he said that his company is now prepared to “advance dialogue” with its owner Digital Currency Group and the company’s creditors.
Genesis’ downfall was at least partially brought on by the sudden sharp downturn in FTX’s fortunes.
FTX was allegedly misusing the funds of its customers by spending them on a third-party investment fund and for the personal use of its former chief executive and co-founder Sam Bankman-Fried.
Genesis was also affected by the downfall of Three Arrows Capital, another crypto firm which went bankrupt in June.
Genesis claims that it’s owed $1.2bn in funds from Three Arrows Capital, which was impacted by the collapse of the Luna and TerraUSD currency.
In July, the company claimed that it had successfully mitigated the losses incurred as a direct result from Three Arrows Capital’s downfall.
To add insult to injury, Genesis is currently in another dispute with Gemini, which insists that Genesis holds $900m worth of funds deposited with the company.
Gemini offered a product called Gemini Earn in collaboration with Genesis, with many consumers tempted by the 7.4% interest on their crypto holdings offered by the company.
However, Genesis stopped withdrawals in November, triggering a row between the Winklevoss owned company and the lender.
Regardless, the bankruptcy is mostly brought around by FTX’s collapse which was the final nail in the Genesis coffin at least in the way the company has operated so far.
While it’s hard to pass blame on Genesis as such, its latest financial trouble highlights the knock-on effect the collapse of purportedly reliable crypto companies could have on the larger crypto community.
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