Genesis crypto lending arm suspends customer withdrawals after FTX meltdown
Company says FTX crypto market collapse has added to ‘unprecedented market turmoil’
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Crypto broker Genesis Global Trading has announced Wednesday that it has made the "difficult decision to temporarily suspend redemptions and new loan originations" following the collapse of crypto market FTX, which it says has created "unprecedented market turmoil."
The move comes as the U.S. and the Bahamas reportedly are discussing potentially extraditing former crypto billionaire Sam Bankman-Fried to the U.S. for questioning regarding the collapse of his company. FTX was the third-largest crypto market in the world at the start of last week when it announced liquidity problems and said it would need a massive infusion of cash to stay afloat.
"The default of [crypto hedge fund Three Arrows Capital] negatively impacted the liquidity and duration profiles of our lending entity Genesis Global Capital. Since then, we have been de-risking the book and shoring up our liquidity profile and the quality of our collateral," the company wrote on Twitter.
"However, FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity," it continued.
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Representations of cryptocurrencies are seen in this illustration. (Reuters/Dado Ruvic/Illustration / Reuters Photos)
"Our #1 priority is to serve our clients and preserve their assets. Therefore, in consultation with our professional financial advisers and counsel, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business," Genesis Trading declared.
The company says it is now working with advisers to "explore all possible options" and will deliver a plan for its lending business next week.
Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, during an interview on "Bloomberg Wealth" with David Rubenstein in New York, Aug. 17, 2022. (Jeenah Moon/Bloomberg via Getty Images / Getty Images)
"We would like to emphasize that Genesis Global Trading, our broker/dealer that holds our BitLicense, is independently capitalized and operated – and separate from all other Genesis entities," it tweeted, adding that "We’re working tirelessly to identify the best solutions for the lending business, including among other things, sourcing new liquidity."
As of Q3 2022, Genesis says it has $2.8 billion in total active loans.
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Representations of cryptocurrencies are seen in front of an FTX logo. (Reuters/Dado Ruvic/Illustration)
Crypto exchange Gemini, which uses Genesis Global Capital as the lending partner for its Earn program – which allows account holders to earn interest on their holdings – said in response to Genesis’ announcement that it has "paused withdrawals and will not be able to meet customer redemptions within the service-level agreement of 5 business days.
"We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible," it said in a statement.
FOX Business’ Anders Hagstrom contributed to this report.