One of the world's largest criptocurrencies, Genesis, is being scrutinized by regulators in the state of Alabama and other U.S. states, while it is pursuing financing to the tune of $500 million to cover funding gaps.
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The company has been in a financial crisis because of the collapse of the FTX. Genesis lost $175 million on FTX, and received a cash bailout of $140 million from parent company Digital Currency Group, but customer runs on funds is making it hard to stay afloat amid the liquidity crunch.
Genesis denies it plans to file for bankruptcy, but its parent company Digital Currency Group said this past week that DCG owed $575 million to Genesis.
We have weathered previous winters of criptocurrencies, and we will come out stronger, according to Barry Silbert, CEO of Digital Currency Group.
The chief concern for regulators is how interlinked firms are with another, potentially sparking more firm collapses in the aftermath of FTX and Three Arrows Capital disasters. The violations of securities laws are being looked at by regulators. The firm, which is referred to as the Goldman Sachs ofCryptocurrency, had more than $115 billion in trades last year, along with more than $130 billion in loans, making its potential collapse worrisome for the broader industry.
Genesis suspended its withdrawals on November 16, citing market turmoil. The company told customers it had no plans to file for bankruptcy in the future, but the company's financial imbroglio has prompted it to seek external help and advice in the aftermath of the announcement.
Since the collapse of Three Arrows Capital in the summer, its woes have been looming, as it lost $1.2 billion. The financial impacts of Genesis were still felt by Digital Currency Group, prompting Genesis CEO Michael Moro to resign and slash 20% of their employees.