Crypto Broker Genesis Trading Suspends Withdrawals from Lending Units

Massive cryptocurrency financial services group Genesis Trading suspended withdrawals from its lenders, blaming the collapse of Sam Bankman-Fried’s corporate empire on “unprecedented market disruption”. The group said on Wednesday it had decided to suspend buybacks and start new loans in the face of “unusual withdrawal requests that exceed current liquidity.” The trouble with Genesis is the latest sign that the failure of Bankman-Fried’s FTX cryptocurrency exchange and trading firm Alameda Research is sending shockwaves through the cryptocurrency industry. On Wednesday, the US House Financial Services Committee announced a hearing on the collapse of FTX and its impact on the digital asset industry. Genesis plays a key role in the digital asset fixed income market. The New York-based group allows customers to lend their coins at yields of up to 10%, while offering similar services to groups including exchange operator Gemini. On the other side of the ledger, coins are lent to institutions such as hedge funds and family offices. Genesis has $2.8 billion of “active loans” as of the third quarter of 2022, according to its website. Digital Currency Group, owned by billionaire Barry Silbert. Cryptocurrency exchange and manager Gemini, run by twins Tyler Winklevoss and Cameron Winklevoss, said on Wednesday that it was “aware” of the challenges Genesis was facing. “The two companies are collaborating with their primary lending partner, Genesis, as soon as possible on a ‘earn’ product that provides interest payments on crypto asset loans to customers,” Gemini said. Genesis added, “We have taken steps to ensure that customers can continue to use their Savings Wallet funds in the event that they are unable to withdraw from Genesis.” Genesis said it hired “the best advisors in the industry to explore everything possible.” Options” and we will deliver our plans for the loan business next week. “We are constantly working to find the best solutions for our lending business, including, among other things, new liquidity sourcing,” said Max Boonen, founder of digital asset market maker B2C2, on Twitter, saying the company “want an extension. [Genesis Trading’s] This book is meant to alleviate the current liquidity shortage.” Genesis said last week it had $175 million of its funds locked up in FTX. On Friday, just hours before Bankman-Fried’s exchange filed for bankruptcy, DCG injected $140 million into Genesis. It became the second lifeline given to Genesis by the parent company this year. Genesis was hit hard by the failure of Singapore-based cryptocurrency hedge fund Three Arrows Capital, which filed for bankruptcy in July after its bets on Bitcoin and other cryptocurrencies failed. According to court documents, Genesis lent $2.4 billion to Three Arrows as a mortgage. During the summer, DCG acquired Genesis’ entire $1.2 billion claim for Three Arrows. Genesis added that Genesis’ trading and custody business is fully operational, adding that the trading division is “independently capitalized and operated and is separate from all other Genesis entities”. DCG, which also owns cryptocurrency asset management firm Grayscale Investments and news site Coindesk, said there would be no impact on the business operations of DCG and its other wholly owned subsidiaries. Video: Cryptocurrency: How Regulators Lost Control
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