The FTX saga is a poisoned gift for the crypto sphere that just keeps on giving. After BlockFi and a host of other crypto firms halted withdrawals over the past few days, the crypto lending firm Genesis has now halted all of the withdrawals at its lending arm.
Why does everyone tell us “we’re solvent”, when they aren’t? pic.twitter.com/lFjj6RLfXT — minigrogu (@minigrogu) November 16, 2022 To wit, the lending arm of Genesis, formally known as Genesis Global Capital, has now suspended all redemptions and loan creations. The firm had $2.8 billion in total active loans at the end of Q3 2022. Last week, Genesis revealed that its derivatives arm had about $175 million in funds that were trapped within the now-defunct FTX. The owner of Genesis, Digital Currency Group, explained the rationale behind this move in the following words: Meanwhile, the blowback from FTX’s default keeps growing. The crypto hedge fund Ikigai has revealed that the majority of its assets are currently trapped within FTX. Similarly, Sino Global Capital has now confirmed that its exposure to FTX ran in “mid-seven figures.” SoftBank has also written down its $100 million investment in FTX. Moreover, BlockFi has so far only commented that it has a “significant exposure” to the SBF’s exchange. We expect this list to keep growing over the next few days as DeFi firms slowly disclose the true extent of their synergies with FTX. FTX’s founder, Sam Bankman-Fried (SBF), ran a Ponzi scheme to the benefit of Alameda Research, the trading arm of his once-sprawling crypto empire. In essence, FTX transferred its native FTT tokens to Alameda at dirt-cheap prices while, at the same time, the exchange inflated FTT’s value by utilizing a part of its revenues to burn a fraction of the token’s circulating supply. Alameda then used its FTT tokens as collateral to borrow client funds from FTX, which were then used to place leveraged bets. This gig ended once Alameda’s exposure to the FTT token became public knowledge, prompting Binance to start dumping its own FTT stash, collapsing the token’s price in the process. This resulted in a bank run as clients tried to exit the Ponzi scheme-promoting exchange, eventually resulting in FTX declaring bankruptcy last week.
Update 1: The Issuer of USDC Stablecoin, Circle, Is Now Apparently in Trouble After Genesis Halted Withdrawals
— Dylan LeClair 🟠 (@DylanLeClair_) November 16, 2022 Bitcoin Magazine’s Dylan LeClair has pointed out that Circle just reduced the short-term yield on the USD Coin (USDC) from 0.25 percent yesterday to just 0 percent today in the wake of Genesis’ announcement.
Circle reported no impairment on any of it’s outstanding loans balances. https://t.co/a0UY7wMXzi pic.twitter.com/IBRn3ANE0e — Dylan LeClair 🟠 (@DylanLeClair_) November 16, 2022 As of the 14th of November, Circle had an exposure of $247 million to unspecified counterparties. LeClair believes that one of those counterparties is Genesis.
— Circle (@circle) November 16, 2022 This assertion has now been confirmed by Circle in a tweet. The crypto firm, nonetheless, contends: As illustrated in the tweet below, Circle’s USDC is currently experiencing “massive whale activity.”
— Santiment (@santimentfeed) November 16, 2022
Update 2: Gemini has Halted Withdrawals for Five Days
Genesis is a lending partner of the crypto exchange Gemini. The company has now published the following statement: The question emerges: who’s next?
