An institutional crypto brokerage is halting customer withdrawals, citing the downfalls of Three Arrows Capital (3AC) and FTX.
In a recent announcement, blue-chip crypto lender Genesis says that while its spot market, derivatives, and custody businesses will remain open, clients won’t be able to withdraw funds due to the firm facing liquidity issues stemming from the collapse of 3AC and FTX.
“The default of 3AC negatively impacted the liquidity and duration profiles of our lending entity Genesis Global Capital. Since then, we have been de-risking the book and shoring up our liquidity profile and the quality of our collateral.
However, FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity…
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.”
Last week, Genesis said that while they have about $175 million worth of crypto derivatives locked into their FTX trading account, the money is not material to the operation of its business and they have no ongoing relationship with either FTX or its trading branch, Alameda Research.
“The Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities. Furthermore, our operating capital and net positions in FTX are not material to our business.
Circumstances surrounding FTX have not impeded the full functioning of our trading franchise. To reemphasize, Genesis has no ongoing lending relationship with FTX or Alameda.”
Genesis’s decision to halt customer withdrawals has also impacted crypto exchange Gemini, which they were collaborating with to power its Earn yield program.
“We are aware that Genesis Global Capital, LLC (Genesis) – the lending partner of the Earn program – has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of five business days.
We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days.”
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