According to reports, Genesis has faced a liquidity crunch following the rapid mass withdrawal caused by users spooked by the collapse of FTX. Genesis executives have reportedly spent the last few days asking investors for new capital, which has yet to materialize.
According to Reuters sources, at least $1 billion in client funds have disappeared from the collapsed FTX crypto exchange.
The rush for funding precipitated by the shortage of liquidity at the lender after the sudden FTX collapseone of the world’s largest crypto exchanges, led Genesis to halt redemptions, revealing that it had $175 million locked in an FTX trading account.
FTX, which had been controlled by 30-year-old multi-billionaire Sam Bankman-Fried, filed for bankruptcy after users discovered the trading company run by Bankman-Fried’s former love interest Caroline Ellison was allegedly use funds from FTX to make investments. Binance originally made an offer to bail out the company but withdrew the proposal, leading to the company’s collapse and the resignation of Bankman-Fried
Genesis is owned by Digital Currency Group, which also has investments in popular exchange Coinbase and several dozen other cryptocurrency companies, according to a report by Axios. Genesis stopped withdrawals and new loans last week and has been relatively quiet for the past few days.
We recognize how difficult the past week has been due to the impact of FTX news. At Genesis, we are fully focused on doing everything we can to serve our customers and navigate this challenging market environment.
— Genesis (@GenesisTrading) November 16, 2022
Genesis is a counterparty for many players in the digital asset space and is closely seen as an indicator of industry strength. He is among crypto lenders feeling acute pressure after a prolonged virtual coin price rout amid several high-profile blowouts.
Other platforms are facing their own struggles as redemption requests pour in after FTX’s bankruptcy filing rocked the crypto sector and left investors jittery about the risk of contagion.
Lawmakers have increased their skepticism of the cryptocurrency industry in response to the crises. A letter from four members of the Senate Banking Committee to several regulators expressed concern about SoFi Technologies, a company that operates as a bank holding company and owns a cryptocurrency exchange subsidiary.
“Over the past year, several crypto market crashes have wiped out trillions of valueincluding another huge crash last week,” lawmakers told SoFi CEO Anthony Noto, asking for information about the company’s compliance with banking standards.