Genesis Trading is having trouble getting more money, and after FTX went bankrupt, they said they might have to change how they do business. It has frozen the money that Bitcoin IRA customers had saved for their retirement.
Genesis’s assets worth $175 million were recently frozen on FTX. Its parent company, Digital Currency Group (DCG), which is run by Barry Silbert, gave it $140 million in new equity funding, but it is said to owe Genesis Trading $575 million from another loan. As of the third quarter of 2022, Genesis Trading had $2.8 billion in loans that were still being paid off. Some of these loans were due to hedge funds and family offices.
Genesis has hired a restructuring advisor to look at its options, which could include filing for bankruptcy. The betting site Polymarket said that Genesis had a 59% chance of going bankrupt by the end of 2022. This number should be taken with a grain of salt because the prediction market’s highest point was once 81%. This means that, compared to the peak of fear, a few less people are betting that Genesis Trading will fail.
Genesis Trading doesn’t seem as sure that it will do well in 2023. It has stopped letting people take money out of its lending platform, which affects people who have digital assets in some retirement accounts. Several of Genesis’ creditors have hired lawyers to try to limit the damage by pursuing a possible restructuring, lawsuit, or negotiation.
In February 2021, a company called Bitcoin IRA released a product called IRA Earn. IRA Earn provides annual interest rates of up to 6%. For its IRA Earn product, Bitcoin IRA worked with Genesis behind the scenes. Now that Genesis has stopped deposits from being taken out of its lending platform, Bitcoin IRA users may have had their retirement funds frozen.
By sending depositors’ money to Genesis, Bitcoin IRA probably had ties to companies like FTX and Three Arrows Capital that have since gone out of business (3AC). Digital Currency Group had to write off a $1.2 billion loan to 3AC and take the loss in order to save Genesis.
Even if Bitcoin IRA was able to pull some of the funds off Genesis Trading before it stopped withdrawals, other depositors will have to wait until a claim passes restructuring or bankruptcy proceedings, which can take years.