FTX Shockwaves Spread, Major Players in the Loan Industry Also Halt Lending (Comprehensive)

Genesis Halts Loans and Redemptions Amid Bank Run
Attention on Potential Ripple Effects to Parent Company DCG Group
Cryptocurrency Exchange Gemini Also Suspends Repayments
WSJ Reports "BlockFi Preparing Bankruptcy Filing"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The bankruptcy filing of FTX, one of the world's top three cryptocurrency exchanges, is shaking the entire market. Amid ongoing bank runs, companies including major lending firm Genesis Trading have simultaneously halted new loans and redemptions.

According to economic media CNBC and others, Genesis Trading announced on the 16th (local time) via its official Twitter that "our priority is to serve customers and preserve assets," adding that "after consulting with professional financial advisors, we are temporarily suspending new loans and redemptions."

This emergency decision was made due to abnormal withdrawal requests following the FTX incident, which exceeded liquidity.

Previously, Genesis Trading revealed that $175 million was tied up in FTX accounts. Concerned about insolvency, customers rushed to withdraw funds, triggering a bank run. Genesis Trading plans to disclose solutions for new liquidity next week.

Headquartered in New York, Genesis has been lending cryptocurrencies to customers with about a 10% fee and also served as a cryptocurrency exchange. It is known to have lent cryptocurrencies to hedge funds and family offices as well. As of the end of Q3 2022, the company's loan portfolio reached approximately 3.74 trillion KRW.

Genesis's parent company, Digital Currency Group (DCG), explained the loan suspension as "a result of severe market turmoil caused by the collapse of trust following the FTX incident."

On the same day, Bloomberg raised concerns about DCG's soundness, stating, "The internal structure of the $10 billion cryptocurrency empire is suddenly collapsing." Founded in 2015 by billionaire Barry Silbert, DCG oversees about 200 cryptocurrency-related companies including Genesis. DCG owns Grayscale Investments, which operates the world's largest cryptocurrency fund, and Foundry Digital, a cryptocurrency mining company.

Bloomberg likened Genesis to the "crown jewel" of Silbert's kingdom, reporting that "questions about DCG's soundness have arisen following Genesis's suspension of repayments after the FTX shock."

On the same day, cryptocurrency exchange Gemini also halted customer fund repayments. Gemini was founded by the billionaire Winklevoss twins, Harvard graduates. Through its interest payment program called "Gemini Earn," it had been cooperating with Genesis, but with Genesis temporarily suspending redemptions, Gemini appears to have taken similar measures.

Gemini stated, "We will work with Genesis to ensure customers can redeem their funds as quickly as possible."

Crypto lender BlockFi also stopped customer withdrawals amid a liquidity crisis. The Wall Street Journal (WSJ) reported that "BlockFi is preparing to file for bankruptcy" and "has significant exposure to FTX and others."

BlockFi is reportedly planning large-scale layoffs in preparation for bankruptcy filing. Earlier, in June, BlockFi requested industry funding due to falling cryptocurrency prices including Bitcoin, and it was confirmed that FTX had supported them through revolving credit at that time.

Additionally, Voyager Digital, a cryptocurrency brokerage and lending firm that FTX had announced plans to acquire, now needs to find another buyer.

Bloomberg News reported, "The rapid collapse of FTX is spreading throughout the cryptocurrency market," adding, "The cryptocurrency world, which had ballooned by lending digital assets under the banner of decentralization, is facing a major challenge triggered by the FTX collapse." Bitcoin's price, which exceeded $60,000 last year, has now fallen to around $16,000.