Genesis Trading is reportedly exploring bankruptcy as they had asked for funds from Binance and Apollo Global Management, and Binance has turned down their request. Genesis Trading has been struggling with reserves and paused withdrawals 6 days ago on November 16.
They had previously lent around $2.3 Billion to Three Arrows Capital.
The mismanagement and collapse of funds by FTX and its collapse have severely impacted institutional exchanges and trading platforms. The latest to fall victim is Genesis Trading. It is a trading platform with quarterly volumes of $20 Billion, recorded last year during Q4. The fall of genesis will surely undermine people’s confidence in crypto as a whole.
Genesis is a Digital Currency Group subsidiary that owns major crypto businesses like Coindesk and Grayscale Investments. Coindesk is probably the most well-known crypto news agency, and Grayscale Investments is a leading crypto asset management firm.
The timeline of events started on November 8 and had multiple conflicting statements from Genesis Trading. They rolled back and changed several of their own statements.
On November 8 (IST Nov-9), Genesis claimed that they had no material or credit exposure to FTX and were unaffected by its collapse.
They changed their statement after 2 days(Nov 10) and claimed that they had some exposure, but it would not impact their ability to serve customers. They also disclosed that they had a trading relationship with FTX, contrary to their earlier message.
They further claimed that they had incurred some losses with their lending arm, which apparently had some exposure to Alameda Research, which was majorly the reason for FTX’s collapse. Their incurred loss was around $7 MIllion. Again in contradiction with their past statement of no exposure.
Genesis claimed to have good economic conditions, contrary to reality. They claimed that their derivative business was robust, and their clients turned to them during market volatility. However, this was soon proven wrong again.
After a few hours, they disclosed that they had a trading balance with FTX, which was around $175 Million, to which they had lost access. They falsely claimed again that this had no impact on their marketing activities.
However, on the morning of Wednesday, November 16, Genesis stopped withdrawals for its lending business. They had run out of their liquidity and could not serve their clients. They further claimed that they had the best advisors and were exploring all possible options. By now, things were looking to slide toward bankruptcy.
Genesis requested an emergency $1 Billion fund from Binance and Apollo Management. There were no tweets or disclosure by Genesis, and this news came from unidentified sources who claimed to be Genesis Insiders.
It turns out that Binance has reportedly turned down the funding request. This has been reported through social media channels by various people.
What does this Collapse mean?
Until now, Genesis has not filed for bankruptcy, but if it does, this would have a severe negative impact on the prices and public sentiment on cryptocurrencies.
FTX had already sent many people hunting for hardware wallets, and if Genesis collapses, it will increase sell-offs, and people would rush to get their money out of exchanges.
The possible bankruptcy of Genesis has more impact than other exchanges of similar size because of its parent company, the Digital Currency Group.
DCG has further exposure to Brave Wallet, Decentraland, Ledger, Lightning Network, Ripple, etc.
Genesis is a part of a leading Crypto Investment Firm, the Digital Currency Group, which owns two major companies, Coindesk and Grayscale Investments. If the lack of funding for Genesis results from the inability of DCG, it is a much more serious affair than it appears to be.
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