Wallets associated with Genesis Trading, a crypto lender owned by conglomerate Digital Currency Group, transferred more than 16,000 bitcoins (worth $1.1 billion) and 166,000 ether ($521 million) on Friday, according to blockchain data provider Arkham Research. This likely indicates that Genesis Trading will begin paying its creditors after the collapse in 2022.
This comes just over a year after Genesis reached an agreement to pay $1.5 billion to Gemini crypto exchange customers affected by the collapse of Gemini's crypto lending platform "Earn". Gemini used Genesis to generate revenue from Earn clients' escrowed cryptocurrency, which Genesis then lent to now-bankrupt hedge fund Three Arrows Capital.
Gemini announced in May that Earn users had received all of their digital assets back in kind, meaning Genesis could move on to paying remaining creditors. In a January 2023 lawsuit, Genesis listed more than $3 billion in claims against its 50 largest creditors, including Gemini, trading giant Cumberland and VanEck's New Finance Income Fund.
Closing the chapter
Friday's move represents the potential closure of a long and messy chapter in the history of cryptocurrencies, an industry rocked by the collapse of several key companies during the 2022 market downturn.
The contagion effect, which began with the collapse of the multi-billion dollar stablecoin project Terra, then destroyed several highly leveraged firms such as 3AC and Celcius, and ultimately led to the bankruptcy of FTX and Genesis Global. The setbacks demonstrated how intertwined and fragile the industry has become during the pandemic-era bull market.
Genesis disclosed in its January 2023 bankruptcy filing that it had over 100,000 creditors and potentially up to $10 billion in liabilities. It is not yet clear where Friday's transfers are going.
The company's debt restructuring and repayment process has been further complicated by parent company DCG's $1.1 billion debt obligation (essentially an IOU due in 2032) to Genesis to help plug the huge hole in its balance sheet caused by primarily by losses to 3AC and later to subsidiary FTX Alameda Research.
New York Attorney General Letitia James filed a civil lawsuit in October 2023 against DCG, Genesis, Gemini and many of their executives for conspiring to defraud investors by concealing $1 billion in trading losses and "corporate bluster" that hid Genesis' insolvency . Genesis closed withdrawals in November 2022.