Just-In: Genesis suspends customer withdrawals in wake of FTX collapse
The Interim CEO Derar Islam announced that the lending division at Genesis Global Trading’s cryptocurrency investment bank, FTX, has temporarily stopped all redemptions and initiated any new loans following the collapse of FTX.
Genesis: New Developments
Derar stated that the withdrawal requests exceeded current liquidity. Therefore, new advisors were hired to explore all options, including raising additional funds. He stated that the move will only affect the lending business, while Genesis, derivatives trading, and custody businesses will “remain fully operational”.
Amanda Cowie, VP communications and marketing at DCG (Genesis owner), was quoted as saying:
“Today Genesis Global Capital (Genesis’s lending company) made the difficult decision today to temporarily suspend redemptions of new loan originations and suspend redemptions. This was in response to extreme market dislocations and industry confidence losses caused by the FTX collapse.
Gemini, the most popular cryptocurrency exchange, also made an official announcement following Genesis’s withdrawal suspension.
1/6 We are aware of Genesis Global Capital, LLC (Genesis), the lending partner for the Earn program, which has halted withdrawals. Genesis will not be able meet customer redemptions within the five-day service-level agreement (SLA). https://t.co/9e48pF3Ymn
— Gemini (@Gemini) November 16, 2022
Genesis disclosed last week that $175 million in locked funds in the FTX trading account belonged in part to its derivatives unit. DCG decided to add $140 million to Genesis’ shares to boost its balance sheet.
Genesis suffered significant losses earlier this year due to the Terra Luna debacle and the failure of Three Arrows Capital (3AC), a hedge fund.
Genesis is one of the most well-known and trusted cryptocurrency brokers. It offers professional investors trading and custody services for digital assets. It has also grown to be one of the largest cryptocurrency lenders over the last few years, allowing funds or other market makers the ability to borrow dollars or digital currency to increase their trades.
The FTX Fiasco
FTX’s sudden bankruptcy has triggered panic selling in the market, which has caused investors to scramble to withdraw their assets from other platforms. Genesis’ financial standing was scrutinized closely for indicators of market health or contagion, just like other companies in the marketplace.
Read more: BlockFi Prepars for Potential Bankruptcy Following FTX
Slump In Lending Market
The lending industry has seen a sharp decline since the collapse of FTX. Loan originations dropped from $44.3 billion in three months to $8.4 million in the third quarter.
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