FTX Tremor Continues: Genesis Considers Filling for Bankruptcy

• Genesis Trading laid off 30% of its workforce recently as it considers filing for bankruptcy.
• Firm suffers losses on loans it provided to Alameda and 3AC.
• Genesis’ parent company, DGC also shuts down its $3.5 billion wealth management division.

Genesis Trading, the beleaguered crypto lending arm of Barry Silbert’s Digital Currency Group (DCG), recently reduced its workforce by 30% as it faces mounting pressure from creditors and the threat of Chapter 11 bankruptcy. The firm reportedly suffered steep losses on loans it provided to now-bankrupt companies, including Alameda Research and 3AC.

Moreover, DGC also announced winding down its $3.5 billion Wealth Management Division (HQ), citing the “prolonged crypto winter.” This could be considered a repercussion of FTX‘s implosion in November last year. Allegedly, the company partners were blindsided by DCG’s decision to close HQ because, until December 2022, HQ oversaw approximately $3.5 billion in assets for crypto entrepreneurs and investors.

Following the FTX crash, Genesis Global Capital suspended customer withdrawals on November 16, 2022, citing “unprecedented market dislocation.” Earlier, Genesis confessed that it had $175 million in FTX exposure, which compelled its parent company, DCG to provide them with a $140 million capital infusion in November 2022.

The interim CEO of Genesis, Derar Islim wrote in a letter, “We believe we can arrive at a solution. We will continue to give you updates on meaningful developments, including any updates on timing.” While communicating that the firm needs more time to come up with a solution for the troubles at its lending unit, Islim added:

While we are committed to moving as quickly as possible, this is a very complex process that will take some additional time.

With the layoffs, nearly 60 positions were lost, leaving the company with approximately 145 employees. In recent months, this is the second round of layoffs for this New York-based firm. The last one occurred in August 2022, when the company reduced its headcount to 260 employees by firing 20% of its workforce.

Seemingly, 2023 had quite a rocky start with a series of layoffs following each other, and interestingly, most of these companies have Sam Bankman-Fried’s FTX to blame for their plummet. Crypto-centric bank Silvergate Capital Corp also felt the tremors of FTX’s crash and announced the reduction of 40% headcounts last week.

The news of downsizing has outnumbered the news of growth, causing tension in the market. Also, the higher interest rates and fears of an economic downturn have roiled cryptos, causing investors to drive away from risky assets, with recent bankruptcies in the space adding to the angst.