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FTX fallout: Genesis Capital pauses withdrawals

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Genesis Global Capital, the lending arm of crypto investment bank Genesis Global Trading, has halted withdrawals and new loans, according to a CoinDesk report. This is the latest fallout from the collapse of the FTX cryptocurrency exchange. While Genesis Capital’s direct clients are institutions and high net worth individuals, it has a knock-on effect, and retail-focused Gemini Earn has been paused.

Last week Genesis Trading acknowledged that it had $175 million in capital locked at FTX and received a $140 million bailout from parent company Digital Currency Group (DCG). 

Today’s statement claims that Genesis Global Capital is a separate legal entity to broker/dealer Genesis Trading which continues to operate.

Another DCG group subsidiary, CoinDesk, broke the story about the amount of FTT (FTX) tokens that Alamada held on its balance sheet. This was the spark that led Binance’s CEO Changpeng Zhao (CZ) to tweet his plans to sell Binance’s FTT holdings. The subsequent run on FTX exposed that the exchange did not hold client assets 1:1, leading to its bankruptcy. This has both a direct impact on those that lost funds, and an indirect effect as nervous investors head for the exits.

“We have hired the best advisors in the industry to explore all possible options. Next week, we will deliver a plan for the lending business. We’re working tirelessly to identify the best solutions for the lending business, including among other things, sourcing new liquidity,” said the Genesis Trading Twitter account. In these circumstances, ‘advisors’ would be assumed to be restructuring experts.

The suspension has had a knock-on effect on the Winkelvoss twins’ Gemini Earn program (note: Gemini, not Genesis). When customers deposit money in the Earn program, it is outsourced to Genesis Global Capital. Hence, Gemini Earn withdrawals are also frozen. However, they emphasized that the Gemini Exchange is separate and unaffected.

Meanwhile, when Three Arrows Capital entered bankruptcy six months ago, Genesis Global Trading filed a $1.2 billion dollar claim. At that stage it was also bailed out by DCG. Genesis CEO Michael Moro stepped down in August, and the company cut a fifth of its staff.

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