In the case of Genesis, investors were deterred by a lack of clarity about the amount of cash needed to plug the hole, says David Bailey, CEO of Bitcoin Magazine, who also heads an activist group representing investors’ interests at Grayscale Bitcoin Trust , a subsidiary of DCG. He describes the deficit as “massive and unknown in extent”.
Brad Harrison, who leads the team behind decentralized credit protocol Venus, paints a similar picture. A Genesis bankruptcy would come as no surprise after the “tectonic” events that rocked the crypto industry over the past year, he says. But on the details: “We’re all just guessing what happens behind closed doors.”
Bailey also claims that potential White Knights were spooked by the murky financial relationship between Genesis and DCG. In particular, the “improper intercompany loans” that “were only disclosed after things had gone sideways.” These loans mean that “DCG has a direct interest in Genesis,” he explains. The parent company is “on the hook”, which makes it “difficult to raise the funds needed”. (DCG was contacted for comment; Silbert previously indicated that these intercompany loans were not unusual.) Genesis declined to comment.
Also “on the hook” is Gemini, the crypto exchange founded by Cameron and Tyler Winklevoss. The company’s yield farming service, which allows clients to earn interest on their crypto, resides on the Genesis platform. But when the lender halted withdrawals, $900 million of Gemini clients’ assets remained stranded — and will remain stranded if Genesis files for bankruptcy.
On January 2nd, after frustrating at the lack of progress, Cameron Winklevoss delivered an ultimatum to Barry Silbert, the founder of DCG. In an open letter posted to Twitter, Winklevoss accused Silbert of “embracing malicious stall tactics” and implored him to “commit to working together to resolve this issue by January 8.” Silbert fired back, claiming Winklevoss misrepresented the situation but did not acknowledge the ultimatum. Neither Gemini nor Winklevoss have returned a request for clarification on what might happen if that deadline is exceeded.
Back in November, Max Galka, founder of blockchain analytics firm Elementus, told WIRED that Genesis is “an order of magnitude less intertwined with other big industry players than FTX.” The implication was that the effects of bankruptcy would be less severe and fewer would catch up with normal people. But he also warned that the FTX fallout would not end with Genesis.
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