The lending arm of crypto investment bank Genesis has suspended Withdrawals and issuance of new loans. This comes as the FTX bankruptcy continues to send ripples through the cryptocurrency industry.
Genesis said on Wednesday that its lending unit, known as Genesis Global Capital, was hit first by the collapse of Three Arrows Capital, a hedge fund that crashed in July. Since then, the company has been mocking its book and “supporting [its] Liquidity profile and quality [its] the company said on Twitter.
However, in the aftermath of the FTX blowout, Genesis saw “abnormal withdrawal requests” which eventually “overflowed.” [their] current liquidity” and forced it to stop redemptions.
Genesis Global Capital is known to be one of the best destinations for institutional clients. According to her website, the company obtained $8.4 billion in loans in the third quarter of this year. It has $2.8 billion in total active loans as of the third quarter of this year.
Last week, Genesis revealed that it had about $175 million stuck in its FTX trading account. In response, Digital Currency Group, owner of Genesis, Grayscale and other crypto companies, provided a $140 million cash injection to bolster Genesis’ balance sheet.
The cryptocurrency investment giant said its lending unit Genesis Global Trading is “independently capitalized.” They added that it operates separately from its other businesses, including the lending subsidiary. Genesis reassured that its spot, derivatives and custody business remains “fully operational”.
“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,” Genesis said, adding that its top priority now is to serve its clients.
Hours after Genesis suspended withdrawals, Gemini, a US cryptocurrency exchange, has suspended its Gemini Earn product, which is based on Genesis. Then the exchange went down for a while before returning.
Circle, the issuer of the second largest stablecoin, USDC, is also affected by Genesis illiquidity. The Circle Yield program, powered by Genesis, is currently showing a 0% return on USDC deposits.