Genesis crypto lending unit halts services, adding to FTX contagion
Why it matters: Knock-on effects of FTX.com 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 FTX.com.
- 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- It means the collateral of existing lending customers can't be withdrawn, even if they close out their loans.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 FTX.com fiasco and was set to receive help to the tune of $140 million from parent Digital Currency Group.
- Its business has been sapped, with third quarter loan originations at $8.4 billion, compared to the year-ago period's $35.7 billion.
- Total active loans are down similarly.
- It has also suffered executive departures.
Editor's note: This is a developing story. Please check back for updates.