Just weeks before crypto lender Genesis filed for bankruptcy, three former company employees had secured millions of dollars for a new cryptocurrency hedge fund, according to correspondence seen by CNBC.
Matt Ballensweig, who left Genesis in September after more than five years at the company, messaged a potential investor on Dec. 13 about a fund he was starting called Hunting Hill Digital. Ballensweig said he had already raised $2.5 million from Bessemer Venture Partners at a $30 million post-money valuation and wrote in the message that he and his partners were raising another $5 million.
The fund’s “flagship product” will go live in the first quarter of 2023, the message said.
Other partners in the fund would include Martin Garcia, who spent more than six years at Genesis, and Reed Werbitt, Genesis’ former head of trading, the message said. Werbitt, Garcia, and Ballensweig all left Genesis around the same time in 2022.
Genesis, which is owned by Barry Silbert’s Digital Currency Group, filed for bankruptcy protection on Thursday, the latest victim of industry contagion caused by the collapse of cryptocurrency exchange FTX in November. In its bankruptcy filing, Genesis listed more than 100,000 creditors, with aggregate liabilities ranging from $1.2 billion to $11 billion.
Ballensweig was named in legal documents related to the Genesis Lending Book Implosion. Gemini, a cryptocurrency exchange and major customer of Genesis, accused Ballensweig of falsely reassuring Gemini in July that Genesis was financially stable. Gemini said Ballensweig told his representatives that Genesis had “capital to operate … long-term,” according to court documents.
Ballensweig did not respond to a request for comment on Gemini’s allegations or his recent capital increase.
Ballensweig spent his last nine months at Genesis as chief executive officer and co-head of trading and lending.
The former Genesis employees have partnered with Adam Guren of hedge fund Hunting Hill, Ballensweig said. Hunting Hill is a $718 million hedge fund, launched in 2010 and transitioned to digital asset investing in 2020 with a crypto opportunity fund.
Neither Hunting Hill nor Bessemer immediately responded to a request for comment.
Ballensweig pitched the flagship product as an “alpha multistrat (delta neutral)” or fund specializing in multi-strategy, low-risk, high-yield investments. He added that the trio will also be launching two more beta products, including a “Top 25 Index” and a “DeFi beta.”
“I think you would be a valuable initial partner,” Ballensweig said in his speech.
Ballensweig isn’t the only Genesis alum looking to launch a fund. Roshun Patel, a former Genesis vice president who left the company in March after nearly four years, was raising money for a new fund in mid-2022. CNBC reached out to Garcia, Werbitt and Patel for comment on their raises, but did not got immediate response.
LOOK: Cryptocurrency lender Genesis files for bankruptcy