Genesis is the latest victim of the FTX crash after it was revealed that it is halting new loan originations and redemptions.
The bank’s lending arm serves an institutional client base known as Genesis Global Capital. At the end of its third quarter, it had more than $2.8 billion in total active loans,
This decision to halt the loans is a shock to many users on Twitter, who did not know nor expect Genesis to be the latest casualty of FTX’s bankruptcy. This is terrible news for its users after the firm initially denied having an ongoing relationship with FTX.
Genesis Trading, which acts as Genesis Global Capital’s broker/dealer, is independently capitalized and operated separately from that lending unit, interim CEO Derar Islim told customers on a call Wednesday, according to CoinDesk. He reportedly added that Genesis’ trading and custody services remain fully operational.
Read Also: FTX appoints 5 new directors as bankruptcy proceeding starts
Earlier Announcement From Genesis
Following FTX’s crash, in a bid to be transparent and straightforward, the Digital Currency Group’s market maker and lending subsidiary— announced that its derivatives business has around $175 million worth of funds locked away in an FTX trading account.
Genesis revealed the information in a Nov. 10 tweet thread, in which the firm clarified that the locked funds would “not impact our market-making activities.”
Read also: Nigerian startup Nestcoin lays off staff, declares FTX held assets.
The firm further emphasized that they have no ongoing relationship with FTX or its sister company Alameda Research. The denunciation of an ensuing relationship came from other crypto firms who desired to distance themselves from the FTX meltdown.
Unfortunately, this devastating news signals a red flag for other companies that initially denied having a cordial relationship with FTX.
The crash of FTX has disrupted the crypto market and negatively impacted some companies and startups. The value of major cryptocurrencies has dropped, and other crypto stakeholders are exploring ways to mitigate the market damage.
The crypto exchange was the second largest in the world by trading volume, with a $32 billion valuation as of January. The recent events have spurred investigations by the U.S. Justice Department, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), a source with knowledge of the investigations told Reuters.
Read also: Binance to start Recovery Fund for crypto projects in crisis
The embattled cryptocurrency exchange is currently speaking with the US Attorney’s Office and ‘dozens’ of US and international regulatory agencies.
FTX disclosed a severe liquidity crisis and confirmed that it had responded to a cyber attack on Nov. 11 after saying on Saturday it had seen “unauthorized transactions on its platform.
“WE faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday,” the court filing stated. “Questions arose about Mr. Bankman-Fried’s leadership and handling the exchange’s complex array of assets and businesses under his direction.”
The filing also revealed the reasons for appointing five new independent directors at each major company, including Alameda research.
Read more: Binance vs FTX war: Here is all you need to know
The Delaware bankruptcy court ruled that the relief requested was in the interests of the debtors, creditors and all parties. The filing stated the “Debtors’ Chapter l1 Cases are complex, consisting of over one hundred debtor entities and involving non-traditional assets.” The embattled crypto exchange has engaged Alvarez & Marsal as financial advisors.
Approximately 130 additional affiliated companies are part of the proceedings, including Alameda Research, Bankman-Fried’s crypto trading firm, and FTX.us, the company’s U.S. subsidiary.
FTX may have more than 1 million creditors, according to an updated bankruptcy filing Tuesday, hinting at the huge impact of its collapse on crypto traders.
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