According to a Jan. 5 report by the WSJ citing ‘people familiar with the matter,’ Genesis is mulling a bankruptcy filing and has let around 30% of its staff go.

The layoffs were across several departments leaving the firm with 145 employees remaining. Genesis has tapped investment bank and financial advisory firm Moelis & Co. to evaluate its options for the future, one of which is a potential Chapter 11 filing, the report added.

A spokesperson for the company told the outlet:

“As we continue to navigate unprecedented industry challenges, Genesis has made the difficult decision to reduce our head count globally. These measures are part of our ongoing efforts to move our business forward.”

Genesis Woes Deepen

The crypto brokerage has been in the spotlight this week following a lambasting of its CEO, Barry Silbert, by Gemini co-founder Cameron Winklevoss. Gemini lent funds to Genesis, and it wants them back.

The Winklevii-led exchange halted withdrawals in mid-November following the FTX collapse as it had a lot of exposure to the now-defunct crypto giant and its venture arm Alameda. It also lent $2.4 billion to the now-bankrupt Three Arrows Capital (3AC) hedge fund.

Genesis also paused loan originations and redemptions at the same time. As a result, Gemini had $900 million in customer funds locked with its yield partner Genesis.

In November, Genesis attempted to raise $1 billion in bailout funding, threatening bankruptcy if it failed to do so. That premise is now much closer to reality.

Interim chief executive Derar Islim said the firm “needs more time to resolve the financial crisis brewing in its lending business and has made progress in reducing costs in its business lines.”

Furthermore, Genesis’s parent company, the Digital Currency Group (DCG), has also been impacted, as has Grayscale, which also comes under its umbrella. DCG has a sizeable stake in Grayscale’s Bitcoin Trust (GBTC), which it may need to liquidate.

Crypto Market Outlook

Markets have spent another day flat, with total capitalization hovering around $853 billion. A Genesis bankruptcy and liquidation of DCG’s GBTC holdings is likely to send crypto crashing another leg down.

The absolute cycle bottom may not be in just yet, but the consolidation is continuing for now.