Crypto Lender Genesis Seeks $1B Emergency Loan

The cryptocurrency lender, Genesis sought an emergency loan of $1 billion from investors before the platform suspended customers’ withdrawals on Wednesday, a report by The Wall Street Journal revealed. It cited a “liquidity crunch due to certain illiquid assets on its balance sheet” for the fundraising.

“There is ongoing run on deposits driven mainly by retail programs and partners of Genesis (i.e., Gemini Earn) and institutional clients testing liquidity,” a confidential fundraising document reviewed by the publication noted.

However, a Genesis spokesperson said the document is now dated as it was prepared over the weekend. She further added that the company is having very positive conversations” with potential investors.

“Genesis had been exploring all possible options amidst the liquidity crunch resulting from the FTX news,” the spokesperson said. “After reviewing a number of options, we made the difficult decision to temporarily suspend redemptions and new loan originations in the lending business so that we can identify the best solution and outcome possible for clients.”

Bad Loans

Genesis reportedly loaned money to Alameda Research, an affiliate of FTX, with FTT tokens as collaterals. However, now the price of FTT tokens has collapsed.

The suspension of the withdrawals came after 'abnormal withdrawal requests' on the platform following the collapse of FTX and its affiliates. Genesis’ interim CEO, Derar Islim, also revealed that the withdrawal requests exceeded the company’s current liquidity.

Additionally, he assured that only the lending business of Genesis is exposed to the liquidity crunch, while its spot and derivatives trading and custody operations “remain fully operational.”

On top of that, Genesis was exposed to the crypto hedge fund, Three Arrows Capital, which collapsed earlier this year. Genesis loaned $2.4 billion to Three Arrows and its parent, Digital Currency Group, and has claimed $1.2 billion from the bankrupt hedge fund.

BlockFi is another crypto lending company that recently paused withdrawals due to its ties with FTX and is reportedly preparing for bankruptcy proceedings.

Meanwhile, several venture capitalists exposed to FTX wrote off their investments. Singapore’s Temasek wrote off $275 million, Soft Bank’s Vision Fund $100 million, and Sequoia Capital, along with a sister fund, $210 million.