Genesis Lending Arm Halts Withdrawals Following FTX Bankruptcy

The implosion and eventual bankruptcy of crypto exchange FTX claims another–this time, it’s the lending arm of crypto investment bank Genesis Global Trading.

The lending unit Genesis Global Capital is temporarily freezing redemptions and new loan originations, Interim CEO Derar Islim informed customers on a teleconference Wednesday. The redemption halt is due to withdrawal requests exceeding the lender’s liquidity profile.

Islim informed call participants that Genesis is looking into solutions for the loan unit, including finding a new source of liquidity. He stated that Genesis wants to present its strategy to clients next week.

He further clarified that Genesis Trading, Genesis Global Capital’s broker, is funded and operated independently of the lending entity. Trading and custody services are still fully operational, assured the chief executive.

According to their website, the unit had around $2.8 billion in total loans at the end of Q3 2022. Last week, the firm disclosed that its derivatives unit had around $175 million tied up and locked in an FTX trading account.

This led the cryptocurrency investor Digital Currency Group to investing $140 million in Genesis Global Trading, a company in its portfolio.

“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.

It is beginning to be a sour year for Genesis as it had been burned earlier this year by the bankruptcy of another crypto firm, Three Arrows Capital. Genesis Asia Pacific in particular reportedly lent the crypto firm around US$2.36 billion, making it one of the claimants of the firm’s US$2.8 billion outstanding obligations.

Earlier this week, Ikigai Asset Management and BlockFi each revealed their exposure to FTX, resulting in the firms halting their respective withdrawals. In its Q3 2022 report, Galaxy Digital reportedly had around US$76.8 million in cash and digital assets invested in the embattled crypto exchange, around US$47.5 million of which is in the process of being withdrawn.

FTX and its founder Sam Bankman-Fried are currently in the process of their Chapter 11 proceedings, reportedly with around $8 billion in outstanding obligations.

Information for this briefing was found via Coindesk and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply