Cryptocurrency exchange Gemini is attempting to recoup the $900 million it loaned to cryptocurrency broker Genesis and its parent company Digital Currency Group (DCG).
Effects Of FTX Collapse
The Financial Times reported that the Winklevoss twins’ cryptocurrency exchange is attempting to recover the assets after Genesis was caught off guard by Sam Bankman-Fried’s FTX crypto platform going insolvent last month.
DCG’s founder, Barry Silbert, informed shareholders in a letter last month that the business owed Genesis Global Capital, the lending division of Genesis, $575 million. The loan, which has a maturity date of May 2023, was employed to “finance investment opportunities” and to buy back stock from non-employee owners.
According to reports, the loan was given out after Digital Currency Group assumed responsibility for Genesis’ liability resulting from the Three Arrows Capital collapse. Back in July, Genesis Global Trading CEO Michael Moro claimed that 3AC, a major counterparty, had defaulted on a sizable margin call due to bankruptcy.
Risk Mitigation Efforts Continue
Genesis revealed that it is collaborating with the Digital Currency Group to continue to isolate risk in a series of tweets.
Genesis Global Trading said that it is temporarily stopping redemptions and new loan originations in the wake of FTX’s demise. Genesis declared on Twitter that its “current liquidity” has been exceeded by the “abnormal withdrawal requests.”
The New York Times reported last month that the corporation had also retained investment bank Moelis & Company to investigate options, including a potential bankruptcy. Grayscale, a division of Digital Currency Group (DCG), has also declined to publish its proof-of-reserves, citing “security concerns.” As a result of the action, questions have been raised regarding the company’s financial stability.
Silbert attempted to reassure investors in his letter last month, claiming that the majority of DCG’s entities are “functioning as usual” in spite of all the evidence pointing to difficulties within the company. On the strength of just $25 million in basic capital raised since its founding, he even claimed that they are on track to bring in $800 million in revenue this year.
He stated at the time that the DCG was dedicated to its long-term aim of expediting the creation of a better financial system, and that it will continue to be a pioneer in the sector. Silbert added that the company had survived prior crypto winters, and while this one may feel more severe, they will emerge from it stronger.
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