Genesis Global Capital is preparing to file for bankruptcy as early as this week, according to people familiar with the matter.
Digital Currency Group's cryptocurrency lending arm has been in secret talks with various creditor groups amid a liquidity crunch. The company has warned that it may need to file for Chapter 11 bankruptcy if it cannot raise cash, Bloomberg previously reported.
Representatives for Genesis Global Capital did not immediately respond to a request for comment. A representative for DCG declined to comment. Talks are ongoing and plans could change, the people added. The financial strain on Barry Silbert's DCG came to light after the collapse of hedge fund Three Arrows Capital. Genesis suspended withdrawals in November, shortly after FTX, a cryptocurrency exchange in which Genesis held some of its funds, filed for bankruptcy. These failures had a knock-on effect on Gemini Trust, a cryptocurrency exchange run by Cameron and Tyler Winklevoss. Gemini Earn, a service that lets Gemini users lend tokens for income through Genesis, also halted redemptions.
Creditors, Genesis and DCG have exchanged several proposals but so far have been unable to reach an agreement, the people said. Kirkland & Ellis and Proskauer Rose have been advising the creditor group.
The company is working on a restructuring plan and has exchanged proposals with creditors, some of which have proposed a combination of cash and equity from DCG, according to people familiar with the matter.
DCG told shareholders it was suspending its quarterly dividend to conserve cash, according to a Jan. 17 letter to shareholders seen by Bloomberg. Cryptocurrency news site DCG Assets CoinDesk confirmed in a statement to Bloomberg on Wednesday that it hired Lazard as a financial advisor to explore options including a partial or full sale.
