To ensure that Genesis was not affected by the loss, its parent company, Digital Currency Group (DCG), he paid. But later, Genesis cut 20 percent of its workforce to cut costs and Michael Moro, its chief executive, resigned.
Genesis once again found themselves on the wrong side of the fallout earlier this month; when FTX filed for bankruptcy on November 11, the company lost $175 million held by the exchange. Once again, DCG stepped in, providing a cash injection of $140 million.
But despite several DCG bailouts, Genesis has been unable to escape FTX’s collapse. Samson Mow, a well-known crypto expert and former CEO of a crypto firm Blockstream, says that the industry is struggling to raise money for customers who want to redeem their crypto. This led to the suspension of funds, which threatens to exacerbate the existing crisis of confidence and increase the possibility of running to other lenders (for example, BlockFi or Voyager Digital) – and the spread spreads.
But Mow says it is important to understand that this is a financial problem, not a solvency problem. In other words, Genesis has enough assets to pay its debts, they are not readily available in cash form. Because of this, a refund “seems impossible,” says Mow.
DCG wanted it too reduce the situation on Twitter, saying that the decision to suspend redemptions and stop new lending was “temporary” and that the problem is only focused on the Genesis lending segment, which means that the sales and storage segments continue to operate as normal.
However, the situation is very difficult for Genesis to raise additional funds, with Binance crypto exchange and private equity firm Apollo Global Management mentioned as possible investments.
Efforts to raise funds have so far been unsuccessful, reports suggest, possibly due to concerns over financial ties between Genesis and other DGC entities. Of the $2.8 billion in loans outstanding on Genesis’ pages, about 30 percent are owed to DGC or its affiliates, but the company’s loans are suspected of having played a major role in FTX’s downfall.
Barry Silbert, CEO of DCG, told investors that this type of corporate debt is not unusual. “We’ve been through the previous winters of crypto and although this may be very difficult, we will all come out of it stronger.”
However, for all his conviction, Silbert’s cry did not stop the speculation. Recently burned with false assurances of FTX founder Sam Bankman-Fried-who tweeted “FTX is fine” on November 7, just days after the hard fall-crypto currency and seeking bankruptcy on Genesis, too.
One of the consequences of a potential fall is playing early. To end the suspension, the crypto exchange Gemini, whose agricultural yield is above Genesis, announced that its Earn customers will no longer be able to access their funds.
On November 22, exchange he explained was trying to “find a solution,” but until then, $700 million in customer money would be tied up. If Genesis were to go bankrupt, some of these funds may not be refundable, as with FTX—and it’s possible that other Genesis-related customers could face the same fate.