Genesis yet to enable customer withdrawals amid FTX contagion

Crypto lending firm Genesis is working to protect client assets and improve liquidity. The FTX contagion spread to the venture capital firm Digital Currency Group’s (DCG) venture Genesis. Genesis informed users in a letter that it seeks to avoid potential bankruptcy and will need weeks to develop a plan.

Genesis needs weeks to fix its lending unit

On December 7, US-based crypto lending platform Genesis issued a letter to its customers. Derar Islim, the interim CEO of Genesis, suggested that the company’s withdrawals may remain halted for weeks to come.

In the letter, Genesis expresses its commitment to being as “transparent as possible” with its customers throughout the process. The interim CEO informed users that Genesis is consulting with seasoned advisors and the company’s owner, Digital Currency Group (DCG).

Genesis halted withdrawals on November 16, 2022, shortly after the collapse and bankruptcy filing of the FTX exchange. Genesis derivatives have a $175 million balance with the FTX exchange that may or may not be recovered. Genesis was impacted by the FTX contagion, losing hundreds of millions of dollars due to the demise of the exchange.

Genesis received a $140 million cash infusion from parent company DCG, but this was insufficient to resolve the firm’s liquidity issues. The lending company firm requested $1 billion in emergency funds shortly after suspending customer withdrawals.

The crypto lending platform is reportedly heading towards bankruptcy after failing to raise the necessary funds from outside sources. DCG’s crypto lending arm then hired restructuring attorneys in order to avoid bankruptcy and develop a strategy for returning customer funds.

Bankruptcies followed withdrawal freezes in 2022

The crypto firms Celsius, Voyager, FTX, and BlockFi, began by freezing withdrawals and subsequently filed for bankruptcy. The crypto ecosystem has been following this trend in 2022. Genesis is collaborating with a team of experts to avoid a similar fate, but the contagion has spread to Gemini Earn.

Genesis reportedly owes $900 million to the crypto lending product Gemini Earn developed by the Winklevoss twins. Users of Genesis’ other arms, such as trading and custody services, are unaffected, and the exchange is currently working on a solution for Gemini Earn customers.