Cryptocurrency lender Genesis Global Trading Inc., which is owned by Connecticut-based Digital Currency Group, is set to file for bankruptcy in the next few days, according to a report from the Wall Street Journal citing sources close to the matter.
The lender has reportedly been considering filing for Chapter 11 protections for some time, laying off 30% of its staffers just after the new year. This after the company laid off 20% of its workforce and lost its CEO back in August. Reports indicate the company owes its creditors as much as $3 billion.
The financial troubles stem from a series of steep losses after two different cryptocurrency firms – Alameda Research (a defunct trading firm) and Three Arrows Capital (a hedge fund that filed for bankruptcy last year – hit difficult times. Three Arrows alone owed Genesis $2.4 billion when it filed for bankruptcy and DCG still has a reported $1.2 billion claim against them after liquidating the collateral.
Alameda, meanwhile, was a sister firm of FTX, which collapsed in November.
DCG made the move to Connecticut at the end of 2021 on a promise of creating 300 new jobs in the state over a five-year period. For their effort, the company would be entitled to $5 million in state incentives. The firm, which has ties to a venture capital firm owned by Gov. Ned Lamont’s wife Annie Lamont, has not yet received those incentives.
Reports indicate that Genesis continues to seek emergency funding to stave off a bankruptcy filing. Following the collapse of FTX, DCG leadership claimed the company was doing just fine, and Connecticut regulators reassured the public.
“They don’t live in isolation, and they’re trying to navigate a more challenging market environment as markets ebb and flow, and that clearly is going on now, especially with the recent news around FTX,” said then Commissioner of the Department of Economic and Community Development David Lehman. “Connecticut taxpayers are not at risk for the business risk of DCG. If the jobs don’t transpire or they’re less (than expected), then ultimately the benefit is going to be less.”
Neither Genesis nor DCG immediately responded to a request for comment.