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Genesis Teetering on The Edge After FTX Collapse – Withdrawals Stopped

Genesis Teetering on The Edge After FTX Collapse - Withdrawals Stopped
Genesis Teetering on The Edge After FTX Collapse - Withdrawals Stopped

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Genesis, a cryptocurrency brokerage company, has announced it will suspend client withdrawals from its lending unit. According to the company, this decision has been necessitated by the ongoing market turmoil caused by the collapse of the FTX cryptocurrency exchange.

Genesis lending unit halts withdrawals

FTX was one of the largest cryptocurrency exchanges before its collapse. Therefore, its bankruptcy filing was expected to cause ripple effects across the sector, as firms exposed to FTX would feel the pinch. One of these firms is Genesis.

Genesis has suspended withdrawals for the lending unit only. The derivatives trading arm for Genesis revealed that it had an exposure of around $175 million in the collapsed FTX exchange.

The brokerage firm issued a statement on Wednesday saying it had reached out to professional financial advisors and counsel, adding that they had decided to halt redemptions temporarily. Moreover, it would also suspend new loan originations within its lending unit.

“Genesis’s spot and derivatives trading and custody businesses remain fully operational. We continue to support our clients who rely on us during volatile market conditions to manage their risk and execute on their business strategies,” Genesis said.

The web 3.0 & crypto space is highly interconnected, such as the signs of stress on the FTX exchange have caused financial troubles for several firms in the sector.

The parent company of Genesis, the Digital Currency Group, has commented on the recent move to halt withdrawals. Digital Currency Group is the parent company of the largest digital asset management company, Grayscale.

The company explained that the move to suspend withdrawals was caused by the “extreme market dislocation.” It further added that industry confidence was low following the collapse of the FTX exchange, which caused billions of dollars worth of losses to customers.

The firm has also stressed that the recent changes only apply to the lending unit at Genesis, adding that Genesis’s trading and custody business continued to operate normally. The company has also added that the action does not affect the normal business operations of the Digital Currency Group or any of its subsidiaries.

Crypto lender BlockFi considers Chapter 11 bankruptcy

Genesis is not the only crypto company affected by the collapse of FTX. BlockFi, which was also financially entangled with FTX, is considering filing for Chapter 11 bankruptcy.

BlockFi has already halted customer withdrawals, admitting that it had a “significant exposure” to the FTX exchange. After the company halted withdrawals, it said it could not continue with its normal operations because of the uncertainty surrounding the FTX situation.

However, BlockFi has denied earlier allegations that it custodied user funds with FTX. The crypto lender said it had ample liquidity to explore all options. Moreover, it has engaged the services of the Berkeley Research Group, which would serve as the company’s financial adviser. During the summer, BlockFi had signed a rescue deal with FTX, receiving a $400 million revolving credit facility in a debt deal.

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