Bitcoin Up 30% YTD | Genesis Files For Bankruptcy

CASUALTIES MOUNT AFTER FTX COLLAPSE

In another blow to the industry that struggles to recover from the collapse of Sam Bankman-Fried’s FTX empire, cryptocurrency lender Genesis filed for bankruptcy protection in New York federal court late Thursday. The company reported between $1 billion and $10 billion in assets and liabilities and listed more than 100,000 creditors in the “mega” bankruptcy filing, with the top two unsecured claims alone amounting to nearly $1.3 billion. Genesis said it has more than $150 million in cash that will provide “ample liquidity” to keep the business operating and “facilitate the restructuring process,” stressing that its derivatives and spot trading, dealer and custody businesses are not part of the filing and will continue to run unhindered.

The filings also listed a $765.9 million loans payable from Gemini, the crypto exchange led by Cameron and Tyler Winklevoss. Last week, the U.S. government sued both companies over Gemini’s Earn cryptocurrency lending program, which was suspended in November after Genesis said it no longer had sufficient liquid assets to meet withdrawals. Following the latest announcement, Cameron Winklevoss said the bankruptcy does not immunize Genesis’ parent company Digital Currency Group or its chief executive Barry Silbert. On Twitter, Winklevoss threatened to escalate the matter and file a lawsuit against Silbert and DCG “imminently” unless a “fair offer to creditors” is made.

TETHER’S BANK FORGED A LUCRATIVE RELATIONSHIP WITH FTX

In late 2021, Bahamian bank Deltec was well on its way to becoming one of the world’s most consequential crypto banks—but it needed money. Born from private wealth management, the bank found a profitable, yet risky new role as the banker of choice for crypto giants. After signing on Tether, a wildly popular stablecoin that had been dropped by traditional financiers, Deltec amassed a roster of white-hot clients, including FTX.

Amid the dollar signs surrounding his new client, Deltec chairman Jean Chalopin saw an answer to his funding woes. In October 2021, he secured a $50 million loan from an entity connected to FTX through one of its executives; the entity’s ties to FTX and its loan to Deltec have not been previously reported. In addition to the loan to Deltec, Alameda invested in Moonstone Bank, owned by Chalopin through a holding company. In a December court filing, Bahamas liquidators revealed the Washington state bank held nearly $50 million in FTX funds across two accounts, appearing to make the exchange its largest customer, and Alameda its largest investor. Read more here.

This week, Moonstone began notifying crypto clients it plans to close their accounts. According to interviews and documentation provided to Forbes by individuals associated with Moonstone, the bank had several dozen crypto customers as of this month. It’s unclear how many of those clients were told their accounts would be terminated.

Source: Forbes Digital Assets, powered by Nomics. Prices as of 4:00 p.m. on January 20, 2023.

FOUNDER OF CRYPTO EXCHANGE BITZLATO ARRESTED IN $700 MILLION LAUNDERING SCHEME

The United States Justice Department announced on Wednesday it charged the founder and majority owner of Hong Kong-registered exchange Bitzlato with unlicensed money transmitting as the exchange facilitated over $700 million worth of illicit funds. Anatoly Legkodymov was arrested in Miami last night following a “years-long” joint investigation by the department of justice, the Treasury Department’s Financial Crimes Enforcement Network and French authorities, according to a press release.

The Hong Kong-registered exchange marketed itself as a peer-to-peer custodial crypto exchange that allowed customers to exchange and trade 60 supported cryptocurrencies with “no middle-man.” The charges allege that the exchange required only minimal identification from users, with “neither selfies nor passports” required. In doing so, it became a safe haven for criminals looking to store their cryptocurrency with few, if any, know-your-customer (KYC) procedures. Bitzlato’s biggest counterpart, the charges allege, was the Hydra Market, a Russian dark-web used for the sale of illegal drugs, stolen financial information and money laundering services. Hydra Market users used Bitzlato until the market's seizure by authorities in April 2022.

The True Value Of Cryptocurrencies

The geopolitical strife taking place in Ukraine has once again underlined the true value proposition of digital currencies that are censorship resistant and easily transportable. To get in-depth research, interviews, trading signals and other valuable information unavailable anywhere else subscribe to Forbes CryptoAsset & Blockchain Advisor.

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ELSEWHERE

New FTX Chief Says Crypto Exchange Could Restart [The Wall Street Journal]

SEC Charges Trader Over Alleged $116 Million Mango Crypto Scam [Bloomberg]

Nexo Pays $45 Million To Settle SEC And State Charges For Failing To Register Lending Product [The Block]

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Key phrases

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