FILE PHOTO: Representations of virtual cryptocurrencies are placed on U.S. dollar banknotes in this illustration taken November 28, 2021. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) - U.S. cryptocurrency brokerage Genesis said it was seeking to avoid bankruptcy after Bloomberg news reported on Tuesday that creditors to the firm are organizing with restructuring lawyers to prevent insolvency.
Citing people with knowledge of the situation, the report said law firms Proskauer Rose and Kirkland & Ellis are being consulted by creditor groups, who are seeking to avoid a situation similar to crypto exchange FTX's rapid descent into bankruptcy.
"Our goal is to resolve the current situation in the lending business without the need for any bankruptcy filing," a Genesis spokesperson said.
Representatives for Proskauer and K&E did not immediately respond to requests for comment.
"We've begun discussions with potential investors and our largest creditors and borrowers, including Gemini and DCG, to agree on a solution that shores up our lending business' overall liquidity and addresses clients' needs," Genesis' interim chief executive Derar Islim told clients in a letter seen by Reuters.
The report comes as U.S. state securities regulators are investigating Genesis Global Capital as part of a wide-ranging inquiry into the interconnectedness of crypto firms, Barron's reported last week, citing a comment from the Alabama Securities Commission director.
Genesis has hired investment bank Moelis & Company "to evaluate the best possible asset preservation strategy and effectuate a roadmap," the firm said in the letter.
The crypto lending arm of U.S. digital asset broker Genesis Trading suspended customer redemptions earlier this month, citing the sudden failure of FTX, where its derivatives business has approximately $175 million in locked funds, the company had said.
Venture capital company Digital Currency Group, which owns Genesis Trading and cryptocurrency asset manager Grayscale, owes $575 million to Genesis' crypto lending arm, Digital Currency Chief Executive Barry Silbert told shareholders this month.
(Reporting by Bharat Govind Gautam and additional reporting by Jaiveer Shekhawat in Bengaluru; Editing by Cynthia Osterman)
