Big Crypto Player Genesis Trading Faces Liquidity Problems, Halts Client Withdrawals
The fallout from the collapse of crypto exchange FTX continues. Now, Genesis Global Capital, the biggest trading desk for professional investors in cryptocurrency markets, announced it will halt client withdrawals. The company is facing a liquidity crisis.
“Following the implosion of FTX and the locking up of over $175 million, Genesis’s lending arm faces a liquidity crisis and is actively seeking new capital,” Bitcoin Magazine reported.
Genesis has paused withdrawals and loan applications, read a tweet from Genesis Trading.
Because of the scope of Genesis, some say if it too collapses, it could cause a bigger impact on the crypto space than the end of FTX. Genesis Global Capital has an institutional clientele with more than $2.8 billion in active loans.
Independently operated and capitalized, Genesis Trading operates as the broker arm of Genesis Capital. Interim CEO Derar Islim said, however, trading operations and custody services currently remain operational.
“Today Genesis Global Capital, Genesis’s lending business, made the difficult decision to temporarily suspend redemptions and new loan originations,” said Amanda Cowie, vice president of communications and marketing at Digital Currency Group (DCG), in an call on Nov. 16. DCG is the parent company of Genesis.
According to Islim, Genesis was actively seeking solutions for its liquidity crises and would be looking for sources of “fresh liquidity.”
The reason the FTX downfall has affected Genesis is that Genesis had more than $175 million in locked funds were held by FTX. DCG had to provide Genesis a $140 million equity infusion.
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“Today Genesis Global Capital, Genesis’s lending business, made the difficult decision to temporarily suspend redemptions and new loan originations. This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion,” said Amanda Cowie, vice president of communications and marketing at DCG.
Cowie added, “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.”
FILE- In this Dec. 8, 2017, file photo, coins are displayed next to a Bitcoin ATM in Hong Kong. (AP Photo/Kin Cheung, File)