Crypto broker Genesis owes $900 million to the Winklevoss twins’ Gemini exchange.
A report Saturday (Dec. 3) by the Financial Times (FT) says brothers Tyler and Cameron Winklevoss are trying to recover the funds after Genesis was impacted last month by the collapse of the FTX exchange.
The report said that Genesis is the main partner in Gemini’s “earn” program, where retail investors lend out cryptocurrency and get a fixed stream of returns. Gemini halted withdrawals from the program last month after Genesis said “unprecedented market turmoil” meant it lacked the liquidity to cover its redemption requests.
Sources told the FT Gemini had set up a creditors’ committee to recoup the funds from Genesis, and that Genesis has been “scrambling” to raise funding and has sought the help of investment banking firm Moelis & Co to explore its options.
Last month, news broke that Genesis could be considering bankruptcy if it doesn’t raise at least $1 billion in new money. Genesis reportedly had $175 million locked in an FTX account and subsequently ran into liquidity problems.
Genesis’ troubles are part of an ongoing avalanche of crypto-universe problems stemming from the implosion of Sam Bankman-Fried’s FTX exchange.
As PYMNTS reported last week, cryptocurrency investment-product assets are at a two-year low thanks to the crisis, which has also put other firms in danger, such as fellow crypto firm BlockFi, which recently filed for bankruptcy.
The company has also sued FTX and is seeking $680 million from Alameda Research, FTX’s sister trading firm, saying Alameda defaulted on collateralized loans.
In its first appearance in bankruptcy court last week, BlockFi said it plans to collect money it is owed by other crypto firms as it tries to reorganize or find a buyer to pay back the $1 billion-plus it owes creditors.
Speaking to PYMNTS last week, BitPay Chief Financial Officer Jagruti Solanki said there could be a silver lining to this upheaval.
For example, “A lot of companies will start to do a lot more thoughtful diligence,” she said. “It might slow things down, but the reason is to prevent exactly what’s happening now, and long term, this is good to protect the consumer.”
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