The fallout from FTX's collapse is mounting, as Genesis looks for a $1 billion savior.
If crypto lender Genius can’t find $1 billion soon, it could be forced into bankruptcy — becoming the latest victim of the FTX exchange’s implosion earlier this month.
Genesis Global Capital is the lending arm of Genesis Global Trading, a large and long-established digital asset broker that could go down with it, Bloomberg reported Monday.
On November 10, Genesis revealed that it had loaned FTX $175 million with insufficient collateral, and was unlikely to get it back quickly, if ever. This led to an increase in withdrawals, resulting in a loss of liquidity, forcing the firm to halt withdrawals.
It has been looking for cash ever since, turning to Binance and Apollo Global Management without success, according to the Wall Street Journal.
On November 22, The New York Times reported that Genesis had hired investment bank Moyles & Co. to “explore options, including possible bankruptcy.” Moyles advised Voyager Digital on its bankruptcy filing a few months ago.
And birth is not lonely. Crypto lenders including SALT and BlockFi were forced to halt withdrawals.
A familiar story
It’s an increasingly familiar pattern that began with lenders like Voyager Digital in July, when the $48 billion collapse of the Terra/LUNA stablecoin in May pushed crypto hedge fund Three Arrow Capital (3AC) into bankruptcy. gave Unsecured loans from a large number of crypto lenders.
Genesis suffered even more damage when its parent company Digital Currency Group (DCG) filed a $1.2 billion lawsuit against 3AC – a case that, like FTX, is likely to take years to resolve.
DCG told Bloomberg on Monday that no bankruptcy filing is “immediately” coming and that it is “continuing to have constructive discussions with creditors.”
But more than anything else, Genesis’ troubles highlight how one company’s financial woes are pervasive throughout the crypto industry.
The collapse of 3AC that started the first round of crypto lenders’ troubles was the result of the collapse of the Terra/LUNA stablecoin.
As bankruptcy proceedings begin against FTX, it appears the financial troubles that led to its collapse in early November began this summer, when FTX’s sister company, crypto trading firm Alameda Research, was heavily The damage was done. This led to it borrowing customer funds from FTX, which quickly collapsed when details of its balance sheet were leaked.
The high-profile FTX in turn borrowed from a number of firms like Genesis, which later halted withdrawals – many smaller crypto investors’ funds were frozen indefinitely, and if Genesis were to withdraw its Without the backing to fill out the balance sheet, it is likely to be lost.
Among these victims are many users of the cryptocurrency exchange Gemini, which ran its crypto yield program, Gemini Earn, through Genesis. Crypto lenders borrow funds through yield programs that pay high returns — Gemini Earn topped out at 8%, which is quite low — for the funds they lend.
But Gemini now has to reassure clients that no other operations have been affected.
Just as DCG has had to reassure investors that its flagship grayscale arm, which holds about $10.5 billion in various cryptocurrencies in trusts including the Grayscale Bitcoin Trust, will not be affected by the Genesis bankruptcy. . Bernstein analysts reported on Nov. 21 that it’s a “ring fence” lenders won’t be able to touch.
DCG CEO Barry Silbert said in a client letter that neither Genesis’ spot and derivatives trading or custody businesses would be affected.
Then there’s Bitcoin itself, which fell well below the $20,000 mark after FTX had been in the $16,000 to $17,000 range for months, dubbed crypto’s “Lemon Moment.”
Fears about the Genesis failure leading to further contagion sent BTC further lower over the weekend, briefly taking it into the $15,000 range.
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