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(Bloomberg) — Just months after FTX’s bankruptcy lured some of the biggest investors into cryptocurrency, the burgeoning industry has a new high-profile target: Genesis. threw
The lender filed for bankruptcy less than two weeks later, but according to its chief strategy officer, broker XClaim has three claims with claims ranging from 25% to 35% of face value and averaging over $1 million. I have confirmed the transaction. Andrew Grants. A $4 million claim has been sold to his Jefferies Leveraged Credit Products LLC, according to Tuesday’s filing.
Genesis, a unit of Barry Silbert’s Digital Currency Group, is the latest in a crypto recession after the collapse of companies like Three Arrows Capital and FTX fueled a liquidity crisis. Another chance for distressed investors to scoop up cryptocurrency claims at steep discounts in hopes of profiting from an eventual recovery.
Unlike previous crypto lawsuits, Genesis has filed for bankruptcy along with its restructuring plan, and at least the $1.65 billion it owed to DCG could contribute to its recovery.
“There’s something of a peculiarity here, in that we have the DCG Group, which is both a major creditor of Genesis and a shareholder of the parent company,” says Glantz.
As Bloomberg News previously reported, FTX was in trouble in November when it filed for bankruptcy with at least $10 billion in debt, attracting the attention of big funds including Baupost Group and Oaktree Capital Management. Investors have begun to make their case for cryptocurrencies. For creditors with assets stuck in these insolvent companies, selling their receivables is a way to raise the cash they need to continue operations or reenter the market.
Genesis has said it hopes to implement its restructuring plan by May 19, but it still needs approval from a judge and other creditors. It hired a former federal prosecutor and raised the odds of raising some money from its parent company, which Grayscale Investments also owns.
“The in and out of bankruptcy isn’t fast, but I hope it’s faster than FTX and Celsius,” said Bradley Max, director of debt brokerage Cherokee Acquisitions.
For FTX, Cherokee data shows claims prices for accounts over $1 million have risen by 18% compared to a maximum of 13% in December. This is due to FTX’s recent announcement that it has found $5 billion in cash or tokens that it can sell to pay back its creditors, Max added.
Earlier, Galore Capital, a prominent crypto fund run by Kevin Chow, had sold about $50 million in bonds at about 16%. Zhou admitted to selling his claim while refusing to comment on his price.
Valuation of FTX assets also brings its own cryptocurrency complexities. This price volatility makes it difficult to determine how much these tokens will be worth in dollars after liquidation, making the book value particularly unreliable.
Earlier in the new year, the Bloomberg index of the largest cryptocurrency was up about 45%. Even tokens closely related to FTX’s disgraced co-founder Sam Bankman-Fried, such as Solana, FTT and Serum, have more than doubled. We are still far from recovering the losses exacerbated by the collapse of the exchange.
XClaim’s Glantz said, “The company’s overall assets may increase or decrease based on the price of cryptocurrencies, so we may have more dollars to distribute.
Even then, there are caveats. “If the company actually liquidated them today, it would just flood the market with that token and cause the price to crash,” he added. “So what is its actual liquidation value?”
–With the help of Laura Benitez, Muyao Shen and Jeremy Hill.
©2023 Bloomberg LP
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