Genesis Global Trading’s lending arm is temporarily stopping redemptions and new loan originations in the wake of FTX’s demise, interim CEO Derar Islim informed customers on Wednesday.
According to the company’s website, as of the end of the third quarter of 2022, Genesis Global Capital has a total of $2.8 billion in active loans.
Genesis Trading, which serves as the broker-dealer for Genesis Global Capital, is independently capitalised and operated separately from that lending unit. Islim said that Genesis’s trading and custody services continue to function normally.
Genesis was examining alternatives for the loan business, including the identification of a new source of liquidity. The firm would provide clients with plan details next week.
According to DCG vice president of communications and marketing Amanda Cowie, Genesis Global Capital, the lending unit of Genesis, had to make the tough decision to temporarily cease redemptions and new loan originations in response to the FTX implosion’s extreme market disruption and loss of industry confidence.
After this month’s implosion of Sam Bankman-Fried’s crypto companies FTX and Alameda Research, the industry has endured a trying time. Islim stated that FTX’s precipitous decline prompted withdrawal requests that surpassed Genesis’ liquidity.
Last week, Genesis announced that its derivatives division’s FTX trading account included around $175 million in locked funds. Therefore, DCG decided to strengthen Genesis’ balance sheet with a $140 million equity injection.
As part of our goal in providing transparency around this week’s market events, the Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities.
— Genesis (@GenesisTrading) November 10, 2022
Gemini, a cryptocurrency exchange and custodian cooperating with Genesis, stated they were working with the Genesis team to help clients redeem their Earn program funds as swiftly as possible. The Earn program service agreement has not been reached, but the firm was encouraged to do everything possible to fulfil its Earn program obligations to customers.
Wednesday, the stablecoin issuer Tether clarified in a blog post that it had no exposure to Genesis or Gemini Earn. “Tether is operating business as usual,” the company stated.
Galaxy Digital (GLXY), a crypto-centric financial service provider, noted that it had no exposure to Genesis’ lending business or Gemini’s Earn program. Last Monday, Galaxy noted that it had around $76,8 million in cash and digital assets exposed to FTX.
Circle, the issuer of the USDC stablecoin, stated in a blog post on Thursday that Genesis is a counterparty in Circle Income, Circle’s offering for institutional investors that offers a fixed-term yield. On November 17, the company reported that Circle Yield had $2.6 million in existing loans secured by strong collateral agreements and that outstanding loan balances were overcollateralized.
Genesis incurred significant losses earlier this year due to the failure of the Three Arrows Capital (3AC) hedge fund.
