$2.8B Crypto-Focused Lending Firm Genesis Halts Withdrawals Fearing A FTX-Induced Bank Run
Genesis Global Capital, the crypto lending unit for crypto investment bank Genesis Trading has decided to halt withdrawals in the wake of the FTX collapse.
On Wednesday morning, Genesis held a 7-minute call with customers informing them that withdrawal requests for Genesis Capital had exceeded their liquidity capital. In a follow-up announcement via Twitter, the firm noted that the past week had been challenging for them “due to the impact of the FTX news” forcing them to halt withdrawals for its lending arm.
“FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity,” tweeted Genesis.
According to the firm, even before Wednesday’s decision, Genesis Global Capital had been struggling to recover after suffering a major blow following the default of crypto lending firm 3AC in June.
“The default of 3AC negatively impacted the liquidity and duration profiles of our lending entity Genesis Global Capital. Since then, we have been de-risking the book and shoring up our liquidity profile and the quality of our collateral,” it wrote.
The firm however assured users that Genesis Global Trading-its spot and derivatives trading, as well as custody businesses, would remain fully operational. Genesis Global Trading, which acts as Genesis Global Capital’s broker is independently capitalized, operated and separate from all other Genesis entities.
The firm further noted that it was working with advisors to fix its liquidity profile and serve clients.
“Next week, we will deliver a plan for the lending business.”
Last week, Genesis disclosed that its derivatives business had $175M in locked funds in its FTX trading account however adding that that did not impact its market-making activities.
Shortly after the announcement, the Winklevoss brothers’ helmed crypto exchange Gemini noted that it was pausing withdrawals on its interest-bearing Earn accounts as a result of Genesis’ changes.
“We are disappointed that the Earn program SLA will not be met…We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible.”Wrote Gemini.
USDC stablecoin issuer Circle also commented in a Wednesday tweet noting that it had no exposure to Genesis. “Circle Yield is an overcollateralized fixed-term yield product. Genesis is a counterparty to Circle in this product. Total Circle Yield customer loans outstanding are $2.6 million as of 11/16/22 and are protected by robust collateral agreements. Outstanding loan balances remain overcollateralized”.
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