Crypto Investment Bank Genesis Global Trading Halts Withdrawals In Wake Of FTX Collapse
Days after the collapse of cryptocurrency exchange FTX, the lending division of crypto investment bank Genesis Global Trading has temporarily stopped accepting redemptions and initiating new loans. Interim CEO Derar Islim confirmed the decision to customers on a Wednesday call.
According to the company’s website, the division known as Genesis Global Capital caters to institutional clients. It 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 by that loan arm. Genesis’ custody and trading services are still fully functional, he added.
Islim informed customers that Genesis was looking into options for the lending unit, including locating a new source of financing. He added Genesis would explain its strategy to clients the following week.
“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,” Amanda Cowie, vice president of communications and marketing at DCG, said.
Cowie added that the decision to halt withdrawals is only limited to the company’s lending business and does not affect the business operations of Digital Currency Group.
Islam further said following the collapse of the crypto exchange FTX, withdrawal requests from customers have far exceeded the liquidity available with Genesis.
Genesis revealed last week that the $175 million in locked funds in its FTX trading account belonged to its derivatives unit.
In order to bolster Genesis’ balance sheet, DCG decided to inject $140 million in fresh equity.
Meanwhile, crypto exchange Gemini has said its Earn program “will not be able to meet customer redemptions within the service-level agreement of five business days” as its lending partner has paused withdrawals.
“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,” it added.
Early this year, Genesis incurred significant losses as a result of the demise of the hedge fund Three Arrows Capital (3AC).
This article was originally published on Benzinga and appears here with permission.