Genesis crypto lending unit halts services, adding to FTX contagion
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 FTX.com.
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- It means the collateral of existing lending customers can't be withdrawn, even if they close out their loans.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.