Nov 16, 2022 - Economy

Genesis crypto lending unit halts services, adding to FTX contagion

Illustration of a cane pulling a pixelated coin off stage.

Illustration: Shoshana Gordon/Axios

Genesis Global Trading's crypto lending unit is the latest to suspend services amidst the fresh market rout kicked off by the public implosion of

Why it matters: Knock-on effects of continue.

What they're saying: A source with knowledge of the situation tells Axios that Genesis is aware that the news will spur further fears of market contagion.

  • But they were not in a position to provide further visibility into what type of customers might be in the most danger based on details of the liquidity issues the company provided.
  • Genesis proper, however, has firewalled off its trading and custody operations from its lending, the person says.

Driving the news: Derar Islim, who was named Genesis' interim chief in August, told customers in a call on Wednesday morning that redemptions and new loan originations would be temporarily halted.

  • That announcement prompted crypto exchange Gemini, founded by the Winklevoss twins, to say its yield-generating Earn program "will not be able to meet customer redemptions."
  • Genesis is the lending partner for Gemini's Earn program.

The big picture: Genesis, like many other crypto firms, held digital assets on

  • Last week it reported that it had $175 million in assets stranded on the platform.

What we're watching: The freeze at Genesis is dangerous in two ways.

  • It means the collateral of existing lending customers can't be withdrawn, even if they close out their loans.
  • And there may be companies relying on credit lines from Genesis to meet obligations that now won't have access to them.

State of play: Genesis' Islim reportedly told customers that Genesis is looking for solutions, including finding a new source of liquidity.

  • More details are due next week.
  • Meanwhile, Gemini said in a blog post that its other products were not affected.

Context: Genesis was struggling before the fiasco and was set to receive help to the tune of $140 million from parent Digital Currency Group.

Editor's note: This is a developing story. Please check back for updates.

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