After FTX’s Collapse, Genesis’ Crypto-Lending Unit Halts Withdrawals

The lending division of Genesis Global Trading has halted redemptions and new loans due to the FTX collapse. On Wednesday, interim CEO Derar Islim held a teleconference to update clients on the latest decision.

Both Loan Redemptions and New Loan Applications Have Been Stopped

The Genesis Global Capital segment serves institutional clients. After the third quarter of 2022, Genesis Global Capital also had $2.8 billion in active loans. This was following the data made available on the company’s website.

Islim claims that the lending company is managed independently from Genesis Trading, which has its distinct capitalization. Genesis Global Capital’s broker/dealer is Genesis Trading. Islim said that Genesis continues to provide its trading and custody services at total capacity.

Islim informed the participants that Genesis is looking for solutions for loan units. Finding a new source of funding is one of these choices. He said that Genesis plans to inform clients of its proposition the following week.

The parent company of Genesis, Digital Currency Group (DCG), which also owns Genesis, is the owner of CoinDesk.

Amanda Cowie serves as the vice president of marketing and communications of DCG. Cowie said that Genesis Global Capital, the company’s lending arm, made the difficult choice to cease both loan redemptions and new loan originations temporarily.

She continued by saying that this decision was in response to the market’s substantial disruption. Additionally, the decision was in light of the decline in industry confidence brought on by the failure of FTX.

Cowie continued by saying the decision would only impact Genesis’s lending business. However, there won’t be any effects on the company’s trading or custody activities.

It is crucial to understand that this decision will not impact the business operations of DCG and our other fully-owned businesses in any manner.

The Crypto Market Is Suffering as A Result of FTX’s Bankruptcy

The decision comes in the wake of Sam Bankman-Fried’s cryptocurrency companies, FTX and Alameda Research, recently failing. Islim said that because of the sudden reduction in FTX, there were more withdrawal requests than Genesis could handle.

Genesis reported $175 million in its derivatives division’s FTX trading account the previous week. Consequently, Genesis received a $140 million stock injection from DCG.

The statement was observed by Gemini, a Genesis-affiliated cryptocurrency exchange and custodian. To assist clients with promptly redeeming their Earn money, the company is working with Genesis. This was in a statement made public by Gemini.

Despite being disappointed, Gemini understands that the conditions of the service agreement for the Earn program won’t be fulfilled.

However, the statement went on to say that they were inspired by Genesis’ commitment to doing all in its power to uphold its obligations to customers in line with the Earn program and by the parent business of Genesis, Digital Currency Group.

Genesis experienced significant losses at the start of this year due to Three Arrows Capital’s bankruptcy (3AC).