Crypto lender Genesis warns of bankruptcy without new funding
As you may recall, we reported last week that the crypto lender Genesis might be the next domino to fall following the implosion of the crypto exchange FTX. On November 16, Genesis suspended withdrawals for its institutional customers. Now, Genesis is warning it may be forced to file for bankruptcy protection without new funding.
According to a report from Bloomberg, the lending giant told investors it could need to file for bankruptcy as it seeks funds for its crypto-lending unit Genesis Global Capital. The company has been seeking to raise over $1 billion, including talks with Binance, but talks have so far failed to materialize, Bloomberg reported.
Genesis’ crypto-lending unit said last week it was suspending withdrawals and originations in its lending business. The unit serves an institutional client base and had $2.8 billion in total active loans as of the end of the third quarter of 2022.
Genesis also took to social media to announce the suspension of redemptions and new loan originations. Genesis said that FTX has “created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity.”
In a thread post, the company said:
“The default of 3AC 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. However, FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity.”
“This decision impacts the lending business at Genesis and does not affect Genesis’s trading or custody businesses. Importantly, this decision has no impact on the business operations of DCG and our other wholly owned subsidiaries,” Cowie added.
The announcement comes just three months after the crypto lending giant laid off 20% of its workforce. CEO also departed the company. Meanwhile, Genesis had previously revealed it had $175mm exposure to FTX.
Crypto broker Genesis is the latest casualty of a $2 trillion digital-asset market wipeout following its exposure to the now-bankrupt crypto hedge fund Three Arrows Capital. On Wednesday, Genesis announced its CEO Michael Moro is stepping down and the company is cutting 20% of its 260-person workforce or 52 jobs.
Derar Islim, who joined Genesis in 2020 and has overseen the development of strategy and key core functions, will take over as interim CEO while the company searches for a permanent replacement, the company said in a statement.