%1

Genesis Global Capital is laying the groundwork for a bankruptcy filing as soon as this week, Bloomberg News reported. The cryptocurrency lending unit of Digital Currency Group has been in confidential negotiations with various creditor groups amid a liquidity crunch. It has warned that it may need to file for bankruptcy if it fails to raise cash, Bloomberg previously reported. Financial pressure at Barry Silbert's DCG began to emerge after the collapse of hedge fund Three Arrows Capital. Genesis suspended withdrawals in November, soon after crypto exchange FTX — where Genesis held some of its funds — filed for bankruptcy. The failures have had ripple effects on crypto exchange Gemini Trust, run by Cameron and Tyler Winklevoss. Gemini Earn — a service that lets Gemini's users get yield for lending out their coins through Genesis — stopped redemptions as well. Creditors, Genesis and DCG exchanged several proposals, but have so far failed to come to an agreement. Kirkland & Ellis and Proskauer Rose have been advising groups of creditors. DCG told shareholders that it's suspending quarterly dividends in an effort to conserve cash, according to a Jan. 17 letter to shareholders seen by Bloomberg.

The Roman Catholic Diocese of Norwich filed a reorganization plan on Tuesday to settle the Diocese’s chapter 11 reorganization case. One element of the plan is to sell the land where Saint Bernard School is located, Fox61.com reported. Part of the bankruptcy process, which has been going on for more than 18 months, is to create a fund to compensate survivors of abuse. Officials with the diocese said, "Under the proposed Plan, the Diocese and other entities will establish a Trust with funding in the amount of approximately $29 million. This Trust will provide financial restitution for survivors of sexual abuse who filed claims in the Diocese bankruptcy case." The diocese said over 140 claims of abuse were received before the deadline. Officials at Saint Bernard School said they learned the diocese is proposing to sell the entire parcel of land in Uncasville on which the school sits. It is expected that any proposed sale tentatively will include the option for the school to lease back the land, with favorable terms, for some period of time.

FTX said yesterday that a probe of its balance sheet showed holdings of customer funds were lower than the exchange’s internal accounts had indicated, acknowledging for the first time there was a shortfall of funds at the U.S. exchange, WSJ Pro Bankruptcy reported. It also disclosed that a hack two days after the company’s bankruptcy filing in November led to the theft of around half of the crypto assets stored on the U.S.-based exchange, valued at about $90 million before the company’s collapse. The same hacker took about $323 million of crypto from FTX’s international exchange, representing about 20% of that exchange’s total crypto assets. FTX also said that it found that a small group of individuals at the company had the ability to remove digital assets from the exchange without any record-keeping. “It has taken a herculean investigative effort from our team to uncover this preliminary information,” said FTX Chief Executive John J. Ray III, who has been leading the company since its bankruptcy filing. “We ask our stakeholders to understand that this information is still preliminary and subject to change. We will provide additional information as soon as we are able to do so.” The company said on Tuesday it identified $5.5 billion of liquid assets across its businesses, including $265 million of unrestricted cash — money that isn’t pledged as collateral or kept in custody for customers — at its U.S. businesses and around $273 million of unrestricted cash at the international exchange. It also identified around $3.5 billion of crypto assets as of Nov. 11, the day it filed for bankruptcy. Read more.

In related news, indicted FTX founder Sam Bankman-Fried later challenged aspects of the company's report in a blog post, Reuters reported. Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, Alameda Research, pushed back against FTX's calculations late Tuesday, saying that the company's lawyers at Sullivan & Cromwell had presented an "extremely misleading" picture of the company's finances. Bankman-Fried said FTX has more than enough money to repay U.S. customers, whom he says are owed between $181 million and $497 million based on his "best guess." Bankman-Fried has not had access to FTX records since stepping down as CEO in November. Read more.

Investors are making higher offers for FTX customer accounts trapped in bankruptcy after lawyers for the failed cryptocurrency exchange said they have located $5 billion in cash and other liquid assets, WSJ Pro Bankruptcy reported. Bids on FTX accounts hit 15.5 cents on the dollar on Wednesday on the bankruptcy claims trading platform Xclaim Inc., which runs a market for buying and selling cryptocurrency accounts in chapter 11. Cherokee Acquisition, which runs a separate bankruptcy claims market, said bids on FTX claims increased to roughly 14 cents on the dollar this week after lawyers detailed their efforts to find and secure the company’s assets. The bids were still just a fraction of the accounts’ listed value, but they represented the highest offers since the cryptocurrency firm’s swift collapse in early November. FTX accounts had been priced at between 6 cents and 11.5 cents on the dollar since it plunged into chapter 11, according to Cherokee Acquisition. The uptick indicated some investors now believe recoveries might be slightly higher than previously expected for FTX’s roughly 9 million customer accounts. FTX lawyers disclosed on Wednesday that they have located $5 billion in cash and liquid assets and that they plan to sell hundreds of additional investment holdings with a book value of $4.6 billion. Read more. (Subscription required.)

The intersection of cryptocurrency and bankruptcy is one of the key issues to be discussed by expert panels at ABI's upcoming Rocky Mountain Bankruptcy Conference Jan. 26-27 in Salt Lake City. Are you registered?

FTX can put four key units including derivatives arm LedgerX and stock-clearing platform Embed up for sale, a Delaware bankruptcy judge ruled on Thursday, CoinDesk.com reported. Investment bank Perella Weinberg is now allowed to start the sale process, which also includes the crypto exchange’s European and Japanese units, and which have already attracted as many as 117 expressions of interest. In formal terms, the judicial decision allows bids, an auction, and a sales hearing to take place, with permission for any actual transaction to come later. U.S. Bankruptcy Judge John Dorsey charged with overseeing the wind-up of the exchange, approved the measures in an order dated Thursday after a hearing held Wednesday. Sale notices will be published within around three business days, with indications of interest to be received between Jan. 18 for Embed and Feb. 1 for FTX Europe and Japan.

The co-founders of failed cryptocurrency hedge fund Three Arrows Capital are now courting investors for a new venture that looks to capitalize on a growing list of bankruptcies in the space, CNBC.com reported. Kyle Davies and Su Zhu are listed as founding members in a pitch deck obtained by CNBC for a distressed debt marketplace called GTX. Davies and Zhu founded Three Arrows Capital, a once $10 billion Singapore-based hedge fund that filed for bankruptcy in July. The fund, also known as 3AC, was ordered to liquidate by a British Virgin Islands court after a plunge in prices and risky trades left it unable to repay lenders. The new investor pitch comes as the Three Arrows founders navigate their own controversial bankruptcy. Advisors working to liquidate 3AC have accused Davies and Zhu of not cooperating with the liquidation process. The advisors served the co-founders a subpoena over Twitter last week, claiming that their whereabouts were still unknown.

A bankruptcy judge will rule on Wednesday on whether to approve the chapter 11 protection motion of United Furniture Industries Inc., the Winston-Salem (N.C.) Journal reported. Bankruptcy Judge Selene Maddox conducted a hearing on Friday on United Furniture's chapter 11 motion which would focus foremost on how the sale of its assets would be handled. Judge Maddox chose not to address the chapter 7 liquidating motion filed on Jan. 6 by Wells Fargo & Co., United Furniture's largest creditor. Judge Maddox took Friday's presentations "under advisement," pending issuing a bench ruling at 4 p.m. on Wednesday. Judge Maddox also chose to reset Wells Fargo's motion for an interim bankruptcy trustee pending a ruling on the United Furniture motion. The United Furniture motions are the company's first formal legal response since it unexpectedly shut down on Nov. 22.