Just-In: Genesis Suspends Customer Withdrawals In Wake Of FTX Collapse

Following the collapse of FTX, the lending division of cryptocurrency investment bank Genesis Global Trading, has temporarily stopped redemptions and initiating any new loans as per the Interim CEO Derar Islim on Wednesday.

New Developments in Genesis

As per Derar, the withdrawal requests exceeded the current liquidity and therefore new advisors have been hired to explore all possible options, including raising new funds. He further stated, the move will affect only the lending business, while Genesis’s spot, derivatives trading and custody businesses “remain fully operational.”

Amanda Cowie, VP of communications and marketing at DCG (Genesis Owner) was quoted saying:

“Today Genesis Global Capital, Genesis’s lending business, made the difficult decision to temporarily suspend redemptions and new loan originations. This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion.”

Gemini — the leading cryptocurrency exchange, also came out with an official announcement following the withdrawal suspension by Genesis.

1/6 We are aware that Genesis Global Capital, LLC (Genesis) — the lending partner of the Earn program — has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days. https://t.co/9e48pF3Ymn

— Gemini (@Gemini) November 16, 2022

Genesis revealed last week that the $175 million in locked funds in its FTX trading account belonged to its derivatives unit. In order to bolster Genesis’ balance sheet, DCG decided to inject $140 million in additional shares.

Earlier this year, Genesis also suffered major losses due to the failure of hedge fund Three Arrows Capital (3AC) due to the Terra Luna debacle.

One of the first and best-known cryptocurrency brokers, Genesis provides professional investors with trading and custody services for digital assets. It had also grown to become one of the biggest cryptocurrency lenders over the past few years, letting funds or other market makers to borrow dollars or digital currencies to amplify their trades.

The FTX Fiasco

FTX’s abrupt bankruptcy has triggered a mass panic-selling in the market, which has led investors scrambling to withdraw their assets from other platforms. Similar to other companies in the market, Genesis’ financial standing has been intensively scrutinized for indicators of the market’s health or possible contagion.

Read More: BlockFi Preps For Potential Bankruptcy After FTX

Slump In Lending Market

Following the FTX collapse, the lending industry has experienced a sharp decline this year, with loan originations dropping from $44.3 billion in the first three months of the year to $8.4 billion in the third quarter.