According to new reports, crypto lending platform Genesis sought to obtain a $1 billion loan at the start of the week. The company reportedly sought emergency funds on Nov 14 in the wake of the FTX crash. However, Genesis was unable to gather the money it needed.
Genesis Global May be Facing Liquidity Problems
A Washington State Journal report cited a crucial fundraising document as the source of its data. Per the paper, Genesis Global Capital is facing liquidity issues which it reportedly credits to illiquid assets holdings on its balance sheet. Likewise, the publication claims that the fundraising file provided details about an ongoing run on deposits.
Genesis’ “retail programs and partners” (like Gemini Earn) and “institutional clients testing liquidity” reportedly pushed the aforementioned run.
A representative from the company reportedly attempted to dismiss the document, stating that it was out-of-date. Interestingly, the spokesperson claimed that Genesis has positive movements lined up involving potential investors as part of efforts to regain liquidity. This comes shortly after the platform announced intentions to halt withdrawals.
Genesis Halts Withdrawals on Lending Arm
On Wednesday, Nov 16, the crypto investment bank suspended some activities on its lending unit. Interim CEO Derar Islim, revealed to customers over a call that they were halting redemptions and new loan originators. Amanda Cowie, vice president of comms and marketing at Genesis’s parent company DCG described it as a “difficult decision”.
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.”
The company pointed to FTX’s resounding collapse for its recent moves. Over the past week, the crypto exchange formally led by Sam Bankman-Fried has plummeted to the bottom of the barrel. FTX filed for Chapter 11 bankruptcy on Friday, after it entered a free fall following competitor Binance’s discarded plans for an acquisition.
Zero Exposure – Genesis’ Original Claim
In a statement shared via email, the Genesis team explained that it had considered the various open paths possible for them. However, suspending withdrawals seemed to be the best thing for the platform.
According to Cowie’s statement, the pause was isolated to Genesis Global lending division. The company took care to explain that their trading and custody businesses, as well as DCG’s operations and other subsidiaries, would remain unaffected.
Notably, early into FTX’s downfall, Genesis shared a tweet saying it had zero exposure to the failed crypto exchange. The company claimed to have gone over its lending and discovered no material net credit exposure.
With regard to today’s market events, we have managed our lending book and have no material net credit exposure. In addition, Genesis has no exposure to any tokens issued by centralized exchanges. We continue to meet the needs of our clients around the world across all products.
— Genesis (@GenesisTrading) November 8, 2022
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