Crypto Lender Genesis Seeks $1 Billion Emergency Loan
Genesis received “abnormal withdrawal requests” from customers that exceeded its liabilities on Wednesday. Two days earlier, it had sought an emergency loan of $1 billion.
At the end of the third quarter, Genesis, which deals in digital assets for companies like hedge funds and asset managers, had approximately $3 billion in active loans. Due to what it described as “extraordinary market instability” brought on by FTX declaring bankruptcy last week, its crypto lending arm ceased approving new loans on Wednesday and stopped allowing clients to withdraw money.
Concerns about contagion are caused by Genesis’ position in the cryptocurrency industry, its connections to failing businesses, and its wider financial presence. An individual with knowledge of the situation claims that Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading firm intimately associated with FTX, were Genesis’ two biggest debtors. Right now, both are going through bankruptcy.
Genesis has been a target for days, according to Joseph Edwards, a partner in investment management at Securitize Capital. For the cryptocurrency market, “it’s a warning of worse results,” especially given that Genesis also works with brokers, family offices, and money managers.
Wednesday saw “abnormal withdrawal demands” from clients, according to Genesis, which exceeded its responsibilities. According to the Wall Street Journal, it had asked investors for a $1 billion emergency loan two days prior. Concerned that Genesis’ problems may spread, other businesses have cut ties with it. An exchange called Crypto.com and Tether, which manages the biggest stablecoin in the world, both stated on Wednesday that they have no exposure to Genesis.
The links FTX has with institutions, according to Paolo Ardoino, chief technical officer of Tether, might possibly have a cascading impact on other businesses, but it is unclear how that would work out.
The connections between Genesis and FTX have become the focus of market players.
According to a person with knowledge of the situation, Genesis also provided loans to Alameda, a trading company intimately associated with FTX, and took FTX tokens as security. According to the statistics portal CoinGecko, the cost of the token has decreased 93% in the last month.