Crypto research firm Messari’s founder Ryan Selkis on Monday said Genesis and Alameda had bad loans and intertwined crypto borrower-lender relationships. FTX and Alameda bankruptcy could risk Genesis liquidation and may cause its parent Digital Currency Group (DCG) to go bankrupt.
Genesis and DCG Legal Dispute With Alameda
Sam Bankman-Fried’s FTX and Alameda commingled financial accounts and management caused the collapse of many crypto firms. Now, Genesis’ relation with Alameda is in question as reports suggest the two firms were the biggest crypto borrower-lender counterparties.
Messari founder Ryan Selkis in a series of tweets on December 12 revealed Genesis unwound over $10 billion of its loan book in Q2 and Q3 2022. With Alameda-Genesis being crypto borrower-lender counterparties, it’s more likely they had loans. Genesis was “responsibly winding down a lot of their positions and yanking borrow.”
However, it doesn’t seem like Alameda or FTX are the creditors of Genesis currently. It shows either Alameda and Genesis had no relationship or closed their positions early.
Genesis calling capital from Alameda is a good risk management by the firm. However, dates of loan drawdowns will be crucial for Genesis and DCG to prevent bankruptcy.
Ryan Selkis asserts there is a 90-day clawback rule in bankruptcy cases. With FTX filing for Chapter 11 bankruptcy on November 11, the clawback date for Genesis is August 13.
He questions whether Genesis yank borrow from Alameda, how much was borrowed after August 13, and would that subject to clawback?
“If there’s a big number that changed hands after 8-13, I’m not sure how someone new to DCG underwrites that risk,” warned Messari founder Ryan Selkis.
With FTX bankruptcy process being long and complex, it would take a long-time to resolve the disputes and paying back creditors. Therefore, Genesis liquidation and DCG bankruptcy will depend on GBTC, if DCG’s $1.1 billion promissory note to Genesis is “callable”, and Genesis call capital from Alameda within the 90-day bankruptcy window.
Ryan Selkis believes there would be a huge legal battle between Genesis and Alameda.
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