Overview: Bitvavo, Genesis, DCG & LUNA, the crypto debacle explained

Overzicht: Bitvavo, Genesis, DCG & LUNA, het crypto debacle uitgelegd

With the recent crypto news that lending platform Genesis has officially filed for bankruptcy, the end of a long period of great uncertainty is in sight. For whom it is all too much information to process, we have once again clearly listed all the important events. What did it all start with?

July, 2022: Crypto hedge fund bankrupt after LUNA collapse

It actually started a little earlier in 2022, namely with the collapse of the Terra (LUNA) network. That caused a huge shock wave on the crypto markets. Among other things, the large hedge fund Three Arrows Capital (3AC) ran into problems, partly because it had LUNA in its portfolio.

Of course, the falling bitcoin (BTC) price did not help either. 3AC went bankrupt after it was unable to repay its debts to various parties, including Genesis. That platform was by far the largest lender for 3AC. Genesis would eventually still $1.2 billion of 3AC.

November, 2022: FTX down, Genesis ceases recordings

A few months have passed and the situation has not improved. The ongoing bear market has put more and more crypto companies under pressure. In the end, even crypto exchange FTX went down. That exchange was previously seen as a figurehead for the crypto industry.

Genesis, in response to the demise, reported that it $175 million stuck in FTX. That was another blow, which already had more than a billion tied up with 3AC. Panic begins to set in and Genesis customers try to withdraw their funds from the platform as quickly as possible.

These are parties such as crypto exchange Gemini and Bitvavo. They used Genesis to let their own customers to strike as an additional service. Genesis eventually decided to cut all the recordings to shut down because it no longer had enough liquidity to meet all withdrawals.

December, 2022: Clarity about link Bitvavo and Genesis

As time passes, the magnitude of Genesis’s problems becomes increasingly clear. Where Terra can be seen as the first domino in this, Genesis is the next stone to fall. The big question, of course, is whether it will be the last.

The major US crypto exchange Gemini is said to have been tied up with a whopping $900 million as a result of the problems. The Dutch platform Bitvavo will receive another €280 million from parent company DCG. However, these are just a few of the many creditors who still hope to get their money back.

For us Dutch people, the situation at Bitvavo is of course especially important. In an attempt to allay some panic among its customers, the crypto exchange soon promised to pay for itself if DCG did not repay the debt.

Discussions between DCG, Genesis and the creditors show that there are enough resources within DCG to be able to pay off the debt in full. Yet during this period fear reigned supreme.

This is evident, among other things, from reporting by the Financieel Dagblad. According to the daily, Bitvavo would have a gap of no less than € 180 million if DCG does not repay. In addition, the owners of the company paid themselves a total of €100 million. Bitvavo quickly responded by stating that the FD’s reporting was incorrect and misleading and that it will refund the vast majority of the dividend if necessary.

January, 2023: Situation Genesis reaches climax

Despite the fact that, according to creditors, DCG would have sufficient resources to repay the debts, Bitvavo received a proposal in the new year that looked slightly different. DCG could repay 70% of the €280 million debt over time. The remaining 30% would then still be negotiated. Bitvavo rejected this proposal because it still saw enough funds at DCG to collect the entire debt.

Meanwhile, on the other side of the big puddle in the United States, one of the founders of Gemini, Cameron Winklevoss, is throwing mud. In an open letter, he accuses the CEO of DCG of slowing things down on purpose. He even accuses him of accounting fraud.

It is during this period that a bankruptcy of Genesis became increasingly likely. The platform is said to have a total of $3 billion in debt. However, Bitvavo reports that this would not change its $280 million claim, only “the timelines could be affected and the process could take longer,” the exchange wrote at the time.

The most recent development is that Genesis is indeed a (Chapter 11) filed for bankruptcy. Bitvavo states that this is an important step in getting the debt back, even though this is not a so-called pre-negotiated Chapter 11 which would have made the process easier and faster. The parties were therefore unable to reach an agreement in the run-up to the bankruptcy filing.

In the near future it will become clear how things are going at DCG and Genesis. The negotiation process will now take place under the supervision of a third party and full transparency will be offered.


Please enter your comment!
Please enter your name here