Genesis’s Withdrawal Suspension
In light of recent market upheavals, Genesis Trading, a significant entity in the crypto financial services realm, has paused withdrawals from its lending unit. This move is attributed to the “unprecedented market turmoil” ignited by the downfall of Sam Bankman-Fried’s FTX.
Market Ripple Effects
Genesis’s decision to halt redemptions and new loan originations is a reaction to “abnormal withdrawal requests” surpassing their liquidity. This turmoil underscores the broader implications of the FTX crypto exchange and Alameda Research’s failure, with the US House of Representatives even announcing a hearing to probe the collapse.
Genesis’s Client Offerings
Operating from New York, Genesis presents clients with the opportunity to lend their coins, promising returns as high as 10%. Their services extend to major groups like the Gemini exchange, operated by the Winklevoss twins, and they also cater to institutional clients.
Financial Health Check
By Q3 2022, Genesis boasted $2.8 billion in “active loans” and had initiated loans worth $131 billion the previous year.
Parent Company’s Perspective
Digital Currency Group (DCG), Genesis’s parent company, attributes the suspension to the “extreme market dislocation” resulting from FTX’s collapse.
Gemini, a business partner, has expressed concerns regarding Genesis’s current challenges. They, along with another partner, Luno, are actively collaborating with Genesis to ensure customer funds remain accessible.
Genesis’s Action Plan
Genesis is proactively seeking solutions, consulting top industry advisers, and is committed to unveiling a lending business strategy soon.
Genesis recently revealed having $175 million tied up in FTX. To stabilize the situation, DCG injected $140 million into Genesis just hours before FTX declared bankruptcy.
B2C2’s CEO, Nicola White, has shown interest in acquiring parts of Genesis’s loan book, emphasizing stringent risk management.
Genesis’s financial health was previously impacted by the bankruptcy of Three Arrows Capital, a Singapore-based crypto hedge fund. Genesis had lent a whopping $2.4 billion to them.
Genesis reassures stakeholders that its trading and custody businesses remain fully functional, operating independently.
DCG, which also owns Grayscale Investments and CoinDesk, confirms that the current situation has not impacted its other business operations.
Financial Times Report
A recent report highlighted Genesis’s decision to halt withdrawals, especially after a court-approved settlement between Genesis and the now-bankrupt FTX.
Genesis’s Business Decisions
Genesis had previously announced the discontinuation of its crypto trading services, a decision made “for business reasons.” The recent withdrawal suspension came in the wake of a settlement between FTX and Genesis.
The crypto industry’s volatile nature is evident, with firms like Genesis navigating these tumultuous waters. Their challenges emphasize the need for agility and adaptability in this ever-evolving market landscape.
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