Distressed Crypto Bids Rise as Jefferies Buys Genesis Claim – BNN Bloomberg

(Bloomberg) — Just months after the collapse of FTX lured some of the biggest struggling investors into crypto, the spiraling industry launched a new high-profile target: Genesis.

While the lender only filed for bankruptcy less than two weeks ago, broker XClaim has confirmed three transactions for its claims with an average value of more than $1 million, in the range of $25 % to 35% of face value, according to the Chief Strategy Officer. Andre Glantz. A $4 million receivable was sold to Jefferies Leveraged Credit Products LLC, according to a filing filed Tuesday.

Genesis, a unit of Barry Silbert’s Digital Currency Group, has become the latest domino to fall in the crypto downturn after the bankruptcies of companies such as Three Arrows Capital and FTX fueled a liquidity crunch. For struggling investors, this is another chance to grab crypto debt at very favorable prices in hopes of profiting from an eventual recovery.

Unlike previous crypto cases, Genesis filed for bankruptcy with a restructuring plan — along with at least $1.65 billion it had loaned to DCG, which could potentially help the recovery.

“There’s kind of an unusual feature here where you have DCG Group, which is both a major creditor of Genesis and the major shareholder,” Glantz said.

Distressed investors began to seriously wade into crypto claims when FTX filed for bankruptcy in November with at least $10 billion in liabilities, attracting interest from big funds including Baupost Group and Oaktree Capital Management, Bloomberg News reported. earlier. For creditors whose assets are tied up in these failing businesses, selling their receivables is a way to raise much-needed funds to continue operating or re-deploy in the market.

Genesis said it hopes to implement its restructuring plan no later than May 19, although that still requires approval from a judge and other creditors. The company has also hired a former federal prosecutor to investigate dealings with the DCG entities, raising the possibility of raising money from the parent company, which also owns Grayscale Investments.

“It won’t be a quick bust, but hopefully it’ll be faster than FTX and Celsius,” said Bradley Max, director of claims broker Cherokee Acquisition.

In the case of FTX, the price of claims rose somewhat to 18% on accounts over $1 million, from up to 13% in December, according to Cherokee data. This was partly due to FTX’s recent announcement that it had found $5 billion in cash or tokens that it could sell to pay off creditors, Max added.

Even before that, Galois Capital, a well-known crypto fund run by Kevin Zhou, sold its roughly $50 million claim at around 16%, according to a person familiar with the matter who declined to be identified because the transaction was private. Zhou confirmed he had sold his claim while declining to comment on pricing.

The valuation of FTX assets also poses a unique cryptographic complication. With such volatile prices, it is difficult to determine the dollar value of these tokens after liquidation, which makes their book value particularly unreliable.

Already in the new year, a Bloomberg index of the largest cryptocurrencies jumped around 45%. Even tokens closely tied to disgraced FTX co-founder Sam Bankman-Fried, such as Solana, FTT, and Serum, more than doubled. They are still far from recouping the losses caused by the disappearance of the stock market.

“The company’s overall assets may increase or decrease depending on crypto prices and therefore there may be more dollars to distribute,” Glantz told XClaim.

Even then, there is a caveat. “If the company were to liquidate them today, it would simply flood the market with that token and drive the price down,” he added. “So what’s the actual liquidation value of this?”

–With help from Laura Benitez, Muyao Shen and Jeremy Hill.

©2023 Bloomberg LP

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