Alabama and several other American states are investigating alleged securities violations and connections with retail investors.
Securities regulators in the U.S are looking into cryptocurrency lending company Genesis Global Capital and other crypto firms, according to reports on November 25.
According to Barron’s, Joseph Borg, director of the Alabama Securities Commission, confirmed that his state and several others are taking part in investigations into Genesis’ alleged connections to retail investors, including whether Genesis and other cryptocurrency firms may have broken securities laws. What additional companies are under investigation is still a mystery.
According to Borg, the main focus of the investigation is whether Genesis and other crypto companies improperly persuaded investors to purchase securities related to cryptocurrencies.
Since the company disclosed it had money stuck in an FTX trading account worth about $175 million, the investigation is another chapter in the Genesis saga. Following the collapse of FTX on November 11, Genesis announced on November 16 that withdrawals had been temporarily suspended due to “unprecedented market turmoil.”
According to reports, the company is having trouble finding funding for its lending division. Genesis, however, has denied rumors that it is “imminently” going bankrupt because of a $1 billion shortfall. On Nov. 22, the business declared:
“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”
As it was revealed on November 23, Genesis has hired restructuring experts to investigate all options, including but not limited to a potential bankruptcy. People with knowledge of the situation stressed that no financial decisions have been made and that the company may yet be able to avoid bankruptcy despite hiring investment bank Moelis & Company to investigate options.
Due to worries about a ripple effect in the sector following the bankruptcy of FTX, along with its sister business Grayscale Investments and their parent company, Digital Currency Group, Genesis has received attention. According to a tweet from Grayscale on Nov. 18, which cited a letter from Coinbase Chief Financial Officer Alesia Haas and Coinbase Custody CEO Aaron Schnarch, all digital assets that underpin Grayscale’s digital asset products are kept in Coinbase’s custody.
