Chapter

Genesis follows other crypto lenders into bankruptcy, signaling the end of crypto lending as we know it

Tuesday, January 24, 2023 by Robinhood Snacks |

More like terminus… One of the last big crypto lenders standing officially threw in the towel. Genesis, part of the DCG crypto conglomerate, declared bankruptcy late last week with plans to get the restructuring ball rolling by May. The goal: break itself apart and sell the pieces to repay creditors — of which there are plenty.

  • Towering: Babel Finance, which offers mining and crypto-lending services, says Genesis owes it $150M.
  • Gemin-high: The Winklevoss-helmed crypto exchange Gemini says Genesis owes its customers $900M. It also reportedly announced job cuts yesterday.

The end of a chapter… and the beginning of Chapter 11. Genesis was a major player in the crypto-lending world, lending out $130B+ in 2021 alone. Cracks appeared when crypto hedge fund 3AC collapsed in July, taking $1.2B of Genesis' funds with it. FTX's November implosion, which jolted the market, widened those already deep fissures. Now Genesis follows Celsius, Voyager, and BlockFi into bankruptcy.

THE TAKEAWAY

Crypto lending's “Wild West” days could be over… For years crypto lenders acted like banks — lending out customer deposits — but without the same regulations and controls that banks are subject to. As high-profile bankruptcies pile up, regulators are cracking down. The SEC charged Genesis with offering unregistered securities this month, and lenders like Nexo are paying multimillion-dollar settlements. Experts say that to stage a comeback crypto lenders will need to up their risk-management game — or risk going the way of the cowboy.