Despite stating a few days ago that its FTX exposure would not affect the full operation of its trading franchise, Genesis Global Trading announced that it will halt withdrawals from its lending unit due to unprecedented market turbulence.
According to Amanda Cowie, vice president of communications and marketing for Digital Currency Group (DCG) this decision only impacts Genesis’ lending business, Genesis Trading and DCG are not impacted by the situation.
Yesterday, November 16, Genesis announced that they would halt withdrawals from their lending unit due to “unprecedented market turbulence” as a result of the FTX crash.
As noted with the Terra Luna crash, crypto firms seem to be too closely linked to one another and thus when one goes down, many more start to fall almost in unison, causing in the wake of the FTX crash, other crypto firms such as BlockFi are considering filing for bankruptcy and now Genesis Global Trading has halted its withdrawals.
The crisis is contagious
According to its website, Genesis Global Trading caters to institutional clients and, as of Q3 2022, was managing $2.8 billion in total active loans.
“Today, Genesis Global Capital, the lending business of Genesis, made the difficult decision to temporarily suspend draws 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,” said Amanda Cowie, vice president of communications and marketing at Digital Currency Group (DCG), according to CoinDesk, Genesis’ ownership group.
Cowie emphasized during the call that this decision only impacts Genesis’ lending business; Genesis Trading and DCG are not impacted by the situation.
Interestingly on November 10 the firm had also assured that its operating capital and net positions in FTX were not material to its business, therefore, the circumstances surrounding FTX would not impede the full operation of its trading franchise.
The chain of contagion continues
Worryingly, the news does not end there. As noted, Genesis Global Trading caters to institutional clients, which will be affected by the suspension of withdrawals.
In fact, crypto exchange Gemini announced that users may start experiencing delays in withdrawals on Earn as a result of the Genesis suspension.
The crypto exchange’s website reads that Gemini partners with reputable third-party borrowers, which, in theory, are vetted to ensure they comply with its partners’ collateral management process. Among these third-party borrowers is Genesis Global Trading.
“We are working with the Genesis team to help clients redeem their Earn funds as quickly as possible,” Gemini said in a statement, adding “We are disappointed that the Earn [servicing agreement] is not being honored, but we are encouraged by the commitment of Genesis and its parent company Digital Currency Group to do everything in their power to meet their obligations to clients under the Earn program.”
Gemini assures that the move “does not affect any other products and services” of the crypto exchange. The question on everyone’s mind now is: who will go down next?
