Crypto lender, Genesis Global Trading is temporarily suspending redemptions and new loan originations in the wake of FTX’s collapse.
Following the collapse of FTX, the lending division of cryptocurrency investment bank Genesis Global Trading has temporarily stopped accepting redemptions and initiating new loans, Interim CEO Derar Islim informed customers in a call on Wednesday.
According to the company’s website, the division, known as Genesis Global Capital, caters to institutional clients and had $2.8 billion in total active loans at the end of the third quarter of 2022.According to Islim, Genesis Trading, which serves as Genesis Global Capital’s broker-dealer, is independently funded and run from that loan arm.
He continued by saying that Genesis’ custody and trading services are still fully functional.Islim informed the callers that Genesis is looking into options for the lending unit, including locating a new source of liquidity.
He added Genesis would explain its strategy to clients the following week. Digital Currency Group (DCG), which owns Genesis, is also the parent organization of CoinDesk.
“Today Genesis Global Capital, Genesis’s lending business, made the difficult decision to temporarily suspend redemptions and new loan originations. This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion,” said Amanda Cowie, vice president of communications and marketing at DCG.”
This decision impacts the lending business at Genesis and does not affect Genesis’s trading or custody businesses. Importantly, this decision has no impact on the business operations of DCG and our other wholly owned subsidiaries,” Cowie added.
The decision comes after a trying time for the sector following this month’s collapse of Sam Bankman-Fried’s cryptocurrency businesses, FTX and Alameda Research. Islim claimed that withdrawal requests following FTX’s sharp decline had surpassed Genesis’ available liquidity.
Genesis revealed last week that the $175 million in locked funds in its FTX trading account belonged to its derivatives unit. In order to strengthen Genesis’ balance sheet, DCG decided to inject $140 million in additional equity.
Gemini, the cryptocurrency exchange and custodian that collaborates with Genesis, took notice of the announcement.
“We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible,” Gemini said in a statement. “We are disappointed that the Earn program [service agreement] will not be met, but we are encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfill their obligations to customers under the Earn program.”.
Genesis suffered major losses earlier this year due to the failure of hedge fund Three Arrows Capital (3AC).
