- Genesis has so far disclosed being $1.8 billion in debt, with the figure expected to increase
- Investors are, however, still confident that its sister firm Grayscale is not affected and will not be the next FTX
The crypto market has remained on edge that subsidiaries of Digital Currency Group (DCG) including crypto assets manager Grayscale and trading and lending platform Genesis may be the next digital currency firms to implode as FTX exchange did last month.
The fears have been renewed by recent revelations made about the financial standing of Genesis. Going by a report by Coindesk, which is also a subsidiary of DCG, Genesis currently has a confirmed $1.8 billion worth of customers’ funds locked up on its platform.
The firm, which halted withdrawals from its lending unit on Nov. 16, owes $900 million to a group of customers using cryptocurrency exchange Gemini’s Earn program. This group is being represented by law firm Latham & Watkins in the funds recovery effort.
Genesis also owes another $900 million to an assorted group of creditors being represented by law firm Proskauer Rose. Meanwhile, the $1.8 billion figure is likely to increase in the coming days as a third group of creditors including bankrupt crypto firms Celsius and Voyager Digital will soon disclose how much is owed them through their legal representatives, Kirkland & Ellis.
Genesis has previously revealed that it has begun discussions with both potential investors and the largest creditors and borrowers to agree on a solution that will shore up the liquidity shortage.
Investors still confident in Grayscale
Grayscale, meanwhile, has given investors assurance that it is not affected by the Genesis crisis. The asset manager, with more than $10 billion worth of Bitcoin (BTC) and other cryptocurrencies under management, said in a statement that it has always operated as an independent entity and has not lent out its assets to DCG or any of its sister firms.
In particular, it disclosed that all digital assets that underlie Grayscale’s digital asset products are held by Coinbase Custody Trust Company, LLC (Coinbase Custody) as custodian for each product, although it declined to provide a proof of reserve citing security concerns.
Interestingly, the company’s track record and recent transparency efforts have earned it the confidence of major investors and crypto market analysts. This is evident in Cathie Wood’s ARK Invest continuing to increase its holdings of shares of Grayscale Bitcoin Trust (GBTC) fund, the biggest Bitcoin fund globally holding over $10.8 billion worth of Bitcoin.
Daniele Servadei, the CEO and co-founder of Italian e-commerce platform Sellix, noted that with more than 10 years of consistent growth through bear and bull markets under its belt, Grayscale has proven to have much more competent and reputable management than FTX. Based on this, he opined that Grayscale is not the next FTX.
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