Another major cryptocurrency exchange could be poised to go bankrupt
According to reports, Genesis has been facing a liquidity crunch following the rapid mass withdrawal prompted by users spooked by the collapse of FTX. Executives at Genesis have reportedly spent the past several days asking investors for fresh capital, which has not yet materialized.
At least USD 1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to Reuters sources.
The rush for funding precipitated by the liquidity crunch at the lender after the sudden collapse of FTX, one of the world’s largest crypto exchanges, led to Genesis halting redemptions, revealing that it had USD 175 million locked in an FTX trading account.
FTX, which had been controlled by 30-year-old multibillionaire Sam Bankman-Fried, filed for bankruptcy after users discovered that the trading firm run by former Bankman-Fried love interest Caroline Ellison, had allegedly been using funds from FTX to make investments. Binance initially made an offer to bail out the company but withdrew the proposal, leading to the venture’s collapse and the resignation of Bankman-Fried
Genesis is owned by Digital Currency Group, which also holds investments in popular exchange platform Coinbase and several dozen other cryptocurrency companies, according to a report from Axios. Genesis ceased withdrawals and new loan originations last week and has been relatively silent over the past several days.
We recognize how challenging this past week has been due to the impact of the FTX news. At Genesis we are entirely focused on doing everything we can to serve our clients and navigate this difficult market environment.
— Genesis (@GenesisTrading) November 16, 2022
Genesis is a counterparty to many in the digital-asset space and is closely watched as a gauge of the industry’s strength. It’s among the crypto lenders that are feeling acute strain after a prolonged rout in virtual-coin prices amid multiple high-profile blowups.
Other platforms are facing their own struggles as redemption requests roll in after FTX’s bankruptcy filing roiled the crypto sector and left investors on edge about the risk of contagion.
Lawmakers increased their skepticism of the cryptocurrency sector in response to the crises. A letter from four members of the Senate Banking Committee to multiple regulators expressed concern over SoFi Technologies, a company that operates as a bank holding company and owns a subsidiary cryptocurrency exchange.
“Over the past year, several meltdowns in the crypto market have wiped out trillions in value, including another huge crash last week,” the lawmakers told SoFi CEO Anthony Noto, requesting information on the company’s compliance with banking standards.