- Genesis Global Capital yesterday announced that it was halting withdrawals, citing the collapse of FTX
- The company said last week that the collapse would not affect its business operations
- This means that Gemini Earn customers’ funds are also stuck
Customers of crypto investment bank Genesis Global Trading and the Winklevoss-backed Gemini found out yesterday that they were the next victims of the fallout from the collapse of FTX. Genesis Global Capital, the lending arm of the Genesis business, announced yesterday that it needed to halt redemptions and stop new loans, which in turn led to Gemini announcing that its Gemini Earn programme had to follow suit, given that Genesis is its lending partner. This is the latest example of the crypto contagion that has spread through the space since May and has been exacerbated by the collapse of FTX.
Genesis Told Customers that Activities Were Not Affected
Genesis Global Capital, the company’s lending and borrowing unit, serves an institutional client base and as of September 2022 had $2.8 billion in total active loans, according to the company’s website. The halting of its redemptions was revealed first to investors on a call and then made public:
Our #1 priority is to serve our clients and preserve their assets. Therefore, in consultation with our professional financial advisors and counsel, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business.
— Genesis (@GenesisTrading) November 16, 2022
However, the halting of services to customers flies in the face of what it said on November 9 when it registered a $7 million loss but said that FTX’s collapse had no impact on its services:
Our business ops, including lending and trading across spot and derivatives, continue to run normally and our balance sheet remains strong. Yesterday was a top 5 volume day for our derivatives business as clients turn to us during volatile market conditions to manage their risk.
— Genesis (@GenesisTrading) November 9, 2022
This November 9 statement, which was reinforced the day after, would undoubtedly have led some users to keeping their funds on the platform, thinking they were safe, when in fact the company was working out just how fucked it was.
Gemini Earn Fighting to Get User Funds Back
In pulling up this drawbridge, Genesis also left Gemini Earn users’ funds stuck. Gemini put out a statement shortly after Genesis’, saying it was trying to find a way to get user’s funds back to them, saying it was “encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfill their obligations to customers under the Earn program.”
However, at this stage in the game, words mean absolutely nothing, and even an exchange with a strong reputation such as Gemini will be under pressure to deliver for customers over the coming days.