• The holding company of troubled crypto lender Genesis Global Capital, Genesis Global Holdco LLC, filed for Chapter 11 bankruptcy protection in New York on Jan. 19.
• This application of Chapter 11 provisions to the crypto industry raises a series of new issues for courts and creditors.
• A trend towards preserving anonymity is emerging among the cases of Celsius, Voyager, BlockFi and FTX.
Genesis’ Bankruptcy Filing
The holding company of troubled crypto lender Genesis Global Capital, Genesis Global Holdco LLC, filed for Chapter 11 bankruptcy protection in New York on Jan. 19. Gemini Earn participants are likely to be disappointed with the outcome as they are among the many groups who face potential losses due to this filing.
Implications for Courts & Creditors
The application of Chapter 11 provisions to the crypto industry raises a series of new issues for courts and creditors. Transparency is usually required in this process which can result in individuals being subject to hacking that exposes their wallet or the crypto entity being subject to scams, privacy law violations and client poaching attempts from rivals.
Preserving Anonymity
Despite divergent approaches by courts when confronted with this issue, a clear trend emerging is toward preserving anonymity — creditor names in the FTX and BlockFi cases remain under seal too — which is illustrative of how the Chapter 11 process is changing to adapt to the crypto space.
Unsecured Creditors’ Committee
An unsecured creditors’ committee (UCC) comprises creditors holding uncollateralized claims whose role is to advocate on behalf of the interests of unsecured creditors.
Lessons Learned
Overall, this case serves as an important reminder that investors should be aware of their rights when investing in cryptocurrency platforms such as Genesis Global Capital or any other platform offering similar services so that they can protect themselves against losses from potential bankruptcies or other financial difficulties faced by these companies.