Following the collapse of FTX, the lending division of cryptocurrency investment bank Genesis Global Trading has temporarily stopped accepting redemptions and initiating new loans, Interim CEO Derar Islim informed customers in a call on Wednesday.
According to the company’s website, the division, known as Genesis Global Capital, caters to institutional clients and had $2.8 billion in total active loans at the end of the third quarter of 2022.
Custody and Trading Services Still Functional
According to Islim, Genesis Trading, which serves as Genesis Global Capital’s broker-dealer, is independently funded and run by that loan arm.
He continued by saying that Genesis’ custody and trading services are still fully functional.
Islim informed the conference call attendees that Genesis is looking into options for the loan unit, including finding a new source of liquidity. Next week, he said, Genesis will give clients a detailed explanation of its strategy.
FTX Crash Killing Market Liquidity
The decision comes after a trying time for the sector with this month’s collapse of Sam Bankman-cryptocurrency Fried’s businesses, FTX and Alameda Research.
Islim said that withdrawal requests following FTX’s sharp decline had surpassed Genesis’ available liquidity.
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.
Implications On Gemini Earn
Gemini, the cryptocurrency exchange and custodian that collaborates with Genesis, took notice of the development.
Gemini then announced that it would team up with Genesis to help customers redeem their funds from the Earn program as quickly as possible. The company added that it was disappointed that it’s Earn Program has been affected but it was encouraged by its parent company Digital Currency Group’s commitment to remedy the situation.
This news follows a bad start to this year after the failure of hedge fund Three Arrows Capital (3AC).
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