A cryptocurrency market collapse has spread panic throughout the industry, leaving firms reeling with billions in unclaimed assets frozen or owed them by creditors owing them billions. Genesis is just the latest victim, being sued for billions owed them from creditors as it engages in high-profile litigation with Gemini’s owners – the Winklevoss twins.
According to bankruptcy filings, creditors of Gemini could discharge some of its debt. Gemini owes nearly $3 billion, including nearly $900 million owed directly to its customers.
Decentralization
Decentralization in crypto is an emerging trend, which involves shifting services away from central servers onto the internet and giving more power for decision making to those using and contributing to it. Furthermore, decentralization makes data and programs easier to manage.
Genesis is one of the largest cryptocurrency trading and lending conglomerates. Last month, their lending arm suspended withdrawals and stopped making loans, while they reduced 30 percent of staff shortly afterwards.
The SEC lawsuit filed against Genesis and its founders accuses them of fraudulence related to Gemini Earn, an investment program where investors lent assets directly to Genesis so as to earn interest on those assets.
Security
Security is of primary concern to investors in crypto assets, particularly those investing their money digitally. While traditional savings accounts are covered by federal deposit insurance and stock brokerage accounts by SIPC coverage, assets held on crypto platforms don’t enjoy these protections.
The Securities Exchange Commission alleged that Genesis and Gemini violated securities laws through their crypto lending program Gemini Earn. Both firms pooled customer assets before lending them out and deducting agent fees from returns as profit margins; according to the SEC’s claims these activities fostered retail exposure while heightening investor risks.
The Securities and Exchange Commission has filed an unregistered securities violation suit against Genesis, with Digital Currency Group (DCG), their parent company, suspending withdrawals this week as a precautionary measure. DCG also owns CoinDesk and crypto asset manager Grayscale Investments – it also has a significant debt load; creditors are fighting in court over even small portions of funds they hold with DCG.
Transparency
Genesis is one of the largest lenders to crypto hedge funds, over-the-counter trading firms and entities offering stablecoin savings products, making its losses potentially devastating to other financial institutions in this industry.
Genesis temporarily suspended withdrawals and loan origination on Nov 16 following a series of poor bets that left them struggling to cope with an economic downturn that rocked wider cryptocurrency markets. Genesis’ parent company DCG owes creditors billions and is engaged in bankruptcy proceedings.
The Winklevoss twins have charged Genesis with intentionally holding on to assets belonging to Earn users while underreporting their value and with misrepresenting DCG and Ad Hoc Group of Creditors “agreement in principle,” as a “dead end.” However, Gemini is working closely with all parties involved on proposed Plan provisions that can best help Earn users recover their assets from Genesis.
Scalability
Bitcoin was designed from its inception to be scalable and the Genesis upgrade will eliminate its current 1MB limit, enabling more transactions at reduced fees of 1/3 of a cent per transaction.
Additionally, this will improve scalability by enabling side chains that are more secure and private than the main chain, creating new currencies and services not currently possible with blockchain-based technology.
Genesis, a crypto lending firm with outstanding debts of billions to creditors, recently filed for bankruptcy and this will put pressure on other exchanges and lenders to stop lending to it. Genesis is owned by Digital Currency Group which also operates investment fund Grayscale and news service CoinDesk.
Innovation
Genesis offers traditional financial participants access to crypto assets through a range of services, such as agency trading, aggregated access to exchanges and passthrough execution on certain markets. Furthermore, Genesis also offers liquidity discovery and capital introduction services for family offices seeking crypto hedge funds with strategies, fee structures and asset exposure that suit their investing needs.
The Winklevosses allege that Genesis’ parent company, DCG, misrepresented its finances by concealing losses through reports. DCG also falsified numbers provided to Gemini’s risk management teams and mischaracterized loan receivables and FTT tokens of Three Arrows as current assets.
The Winklevosses have filed suit against DCG and Gemini in an effort to obtain permanent injunctive relief, disgorgement of any illegal gains and prejudgment interest as well as banning DCG and Genesis from operating in the US.
