Latest Developments on the Genesis Liquidity Crisis Event (Ongoing Updates)
Sources say that Genesis is facing financing difficulties and has lowered its fundraising target to $500 million; Genesis previously provided $2.36 billion in loans to the bankrupt Three Arrows Capital.整理：ChainCatcher
The world's largest crypto lending platform, Genesis, suspended withdrawals from its lending division on November 16. In its conference call and subsequent explanations, it indicated that Three Arrows Capital and FTX were two significant influencing factors. The default of Three Arrows Capital negatively impacted the liquidity of Genesis's lending division, Genesis Global Capital, compounded by the massive market turmoil caused by the recent collapse of FTX, leading to abnormal liquidity issues for Genesis.
Currently, we do not know the exact amount of Genesis's liabilities and cash flow, but it is certain that if Genesis cannot replenish its liquidity soon, its bankruptcy announcement is just a matter of time. This article will continue to track the latest developments.
The following is organized by timeline:
November 22:
Sources: Genesis provided $2.36 billion in loans to the bankrupt Three Arrows Capital
Watcher.Guru tweeted that the crypto lending institution Genesis previously provided $2.36 billion in loan funds to the now-bankrupt Three Arrows Capital.
ChainCatcher previously reported that Genesis's emergency financing target has been reduced from $1 billion to $500 million. (Source link)
Bernstein report: GBTC will be protected from Genesis crisis impact
According to CoinDesk, the well-known financial advisory firm Bernstein Research released a report stating that the suspension of withdrawals by Genesis Global Capital does not directly affect Grayscale's Bitcoin Trust (GBTC). Even if Genesis cannot raise liquidity for its lending book and files for bankruptcy, creditors cannot claim against GBTC assets.
The report states that the market is concerned that Grayscale may be considered a strategic option in the event of a disaster, but analysts believe that even in the worst-case scenario, DCG would prefer to retain Grayscale rather than Genesis's business. Bernstein's analysis suggests that Grayscale is DCG's "flagship business and cash cow," generating approximately $300 million in fee revenue annually. Analysts Gautam Chhugani and Manas Agrawal wrote, "The trust structure of GBTC protects its holders and avoids failures within DCG or DCG Group entities." (CoinDesk)
Insiders: Genesis has been negotiating with Binance for potential investment
According to Bloomberg, citing sources, the crypto trading and lending institution Genesis has been facing liquidity tightening following FTX's bankruptcy filing this month and has been seeking to raise funds, including negotiating a potential investment from Binance, but fundraising has not yet materialized, and Binance representatives declined to comment. (Bloomberg)
Insiders: Genesis faces financing difficulties, has halved its financing target to $500 million
According to Bloomberg, citing insiders, Genesis's lending division is facing difficulties in financing, and the company warned potential investors that it may file for bankruptcy if it cannot raise funds. Reportedly, its financing target has been reduced from $1 billion to $500 million. Insiders added that its parent company, DCG, is unwilling to sell part of its venture capital portfolio and has no plans to sell its other company, Grayscale.
Bloomberg cited a statement from Genesis saying it has no plans to "immediately" file for bankruptcy and is working to resolve the current issues. According to previous reports, Genesis Trading has suspended redemptions and new loan issuances. DCG stated that the operations of its other wholly-owned subsidiaries have not been affected, and DCG has injected $140 million in equity into Genesis Trading. (Bloomberg)
November 21:
Insiders: DCG owes its subsidiary Genesis over $1.1 billion and requests non-disclosure
Twitter user Andrew tweeted that Digital Currency Group (DCG) owes over $1.1 billion to its subsidiary Genesis through a previously undisclosed promissory note hidden from potential investors and requested non-disclosure.
According to ChainCatcher's previous report, Genesis is seeking a $1 billion emergency loan from investors due to liquidity tightening caused by certain illiquid assets on its balance sheet. DCG has reportedly deleted the names, positions, and images of its team, board members, and board advisors in recent days. (Source link)
November 20:
DCG deletes its team introduction page
Grayscale's parent company, Digital Currency Group (DCG), has reportedly deleted its team introduction page (https://dcg.co/who-we-are/). This page originally displayed the names, positions, and images of its team, board members, and board advisors.
According to Way Back Machine, the DCG team introduction page was deleted in September. Snapshots show that the DCG team consisted of 25 people, with 3 board members (including founder and CEO Barry Silbert) and 1 board advisor.
According to previous reports, Genesis announced on Wednesday that its cryptocurrency lending division, Genesis Global Capital, has suspended redemptions and new loan issuances. Grayscale stated that its products continue to operate as usual, and Genesis Global Capital is a subsidiary of Grayscale's Genesis Global Trading, not a counterparty or service provider for any Grayscale products. All underlying digital assets of Grayscale's products are securely stored in Coinbase Custody, but specific address information will not be disclosed. (Source link)
November 18:
South Korean crypto exchange Gopax has suspended its Genesis DeFi service GOFi
Affected by the Genesis incident, South Korean cryptocurrency exchange GOPAX announced on Thursday that it has halted the withdrawal of principal and interest in its DeFi service GOFi, which represents products from the crypto lending platform Genesis Global Capital. Reportedly, the suspension of GOFi was proposed by its partner Genesis Global Capital. (forkast)
Genesis is seeking a $1 billion emergency loan from investors
According to The Wall Street Journal, the crypto trading and lending institution Genesis was seeking a $1 billion emergency loan from investors earlier this week before suspending redemptions, citing liquidity tightening due to certain illiquid assets on its balance sheet.
Genesis's interim CEO Derar Islim stated in a conference call on Wednesday that its cryptocurrency lending division, Genesis Global Capital, has suspended redemptions and new loan issuances. Derar Islim mentioned that Genesis is looking for solutions for its lending division, including seeking new sources of liquidity. Derar Islim stated that Genesis's trading and custody business is still operating normally.
Earlier, ChainCatcher reported that, according to sources cited by Blockworks, Zhao Changpeng is considering acquiring Genesis's loan assets. (Source link)
November 17:
Circle: Genesis is the counterparty for financial products, with $2.6 million in unpaid loans from customers
Circle tweeted that Circle Yield is an over-collateralized fixed-rate yield product, and Genesis is the counterparty for this product.
As of November 16, 2022, the total amount of unpaid loans from Circle Yield customers was $2.6 million, protected by robust collateral agreements. The current unpaid loan balance remains over-collateralized, and Circle will ensure that the loans are protected from potential losses. (Source link)
Crypto market maker B2C2 plans to purchase some of Genesis's short-term loans at a discount
Crypto market maker B2C2 is considering purchasing some of Genesis's short-term loans at a discount. B2C2 founder Max Boonen stated that the potential deal is expected to be completed within the week.
"We're not doing this out of altruism; acquiring discounted loans can enhance B2C2's reputation and can actually make money." However, Boonen has not seen Genesis's balance sheet and declined to comment on the specific figures of the potential deal.
Additionally, Genesis has not disclosed whether it will proceed with this transaction, and preliminary discussions have taken place with Boonen. (Source link)
Gemini: System failure caused by database connection interruption, service has been restored
Gemini tweeted that a major database of theirs had a connection interruption with Amazon Web Services EBS, and service has now been fully restored, with customer funds safe.
According to previous reports, Gemini's system experienced interruptions affecting multiple services, including trading platforms and fiat deposits and withdrawals. Its financial products were impacted by Genesis's suspension of redemptions, and they are working with the Genesis team to help customers redeem funds from the Earn program as soon as possible.
Genesis and its parent company, Digital Currency Group, have committed to fulfilling their obligations to Earn program customers to the best of their ability and will continue to communicate with all Earn customers. This will not affect any other Gemini products and services. (Source link)
Insiders: Zhao Changpeng is considering bidding for Genesis's loan assets
According to Blockworks, citing insiders, Binance CEO Zhao Changpeng is considering bidding for Genesis's loan book and has begun to seek more information regarding Genesis's balance sheet status. As of the end of Q3 2022, Genesis had a total loan amount of $2.8 billion. Another insider noted that any approach could be rejected by Genesis's parent company, DCG, and would require over $2 billion.
Earlier, Genesis Global Trading's interim CEO Derar Islim stated that its cryptocurrency lending division, Genesis Global Capital, has suspended redemptions and new loan issuances.
Additionally, Genesis had stated that its derivatives division had $175 million locked in FTX trading accounts; later, Genesis stated that it received $140 million in equity infusion from its parent company, DCG, which will be used to optimize Genesis's balance sheet and strengthen its position in the crypto market. (Source link)
November 16:
Grayscale: Products continue to operate as usual, Genesis Global Capital is not its counterparty or service provider
Grayscale Investments stated that the safety of the digital asset products held by investors is not affected by recent market events. Genesis Global Capital, LLC is a subsidiary of Genesis Global Trading, Inc. and an affiliate of Grayscale. Genesis Global Capital announced the suspension of redemptions and new loan issuances. Genesis Global Capital is not a counterparty or service provider for any Grayscale products.
Grayscale products continue to operate as usual, and recent events have not affected product operations;
The underlying assets of the products remain safe and secure, stored in Coinbase cold storage isolated wallets;
Grayscale does not borrow, lend, re-mortgage, or otherwise pledge the underlying assets of its products, and custodians are prohibited from engaging in such activities;
Publicly quoted products continue to trade and generate reports and audited financial statements for the U.S. Securities and Exchange Commission and over-the-counter markets. (Source link)
Genesis: FTX collapse led to its liquidity crisis, 3AC default negatively impacted it
The crypto trading and lending institution Genesis tweeted that the default of 3AC (Three Arrows Capital) negatively impacted the liquidity of Genesis's lending division, Genesis Global Capital. Since then, Genesis has been working to reduce balance sheet risks and enhance its liquidity position and collateral quality. However, the collapse of FTX caused unprecedented market turmoil, leading to withdrawal requests that exceeded Genesis's current liquidity.
Earlier, ChainCatcher reported that there were market rumors suggesting that the crypto trading and lending institution Genesis might have solvency issues, and the company would have a call with creditors at 8:00 AM EST on November 17 to explain the situation. If the rumors are true, Genesis might sell ETHE and GBTC to repay lenders. (Source link)
Genesis's cryptocurrency lending division suspends redemptions and new loan issuances
According to CoinDesk, Genesis Global Trading's interim CEO Derar Islim stated in a conference call on Wednesday that its cryptocurrency lending division, Genesis Global Capital, has suspended redemptions and new loan issuances. Derar Islim mentioned that Genesis is looking for solutions for its lending division, including seeking new sources of liquidity. Additionally, Derar Islim stated that Genesis's trading and custody business is still operating normally.
As of the end of Q3 2022, Genesis Global Capital had a total loan amount of $2.8 billion. (Source link)
Crypto KOL: Genesis may have solvency issues
Crypto KOL Autism Capital posted on social media that there are market rumors suggesting that the crypto trading and lending institution Genesis may have solvency issues, and the company will have a call with creditors at 8:00 AM EST on November 17 to explain the situation. If the rumors are true, Genesis might sell ETHE and GBTC to repay lenders.
According to Coinglass data, the current negative premium of Grayscale Bitcoin Trust (GBTC) is 37.08%, and the negative premium of the ETH Trust is 34.47%. (Source link)
November 11:
Genesis to receive $140 million equity infusion from parent company DCG
The crypto trading company Genesis will receive a $140 million equity infusion from its parent company, Digital Currency Group (DCG). The infusion will be used to strengthen Genesis's balance sheet and consolidate its position in the crypto market.
Earlier, ChainCatcher reported that Genesis Trading disclosed that $175 million of its derivatives business-related assets were locked in FTX accounts. (Source link)
Genesis Trading's derivatives business has risk exposure to FTX, with approximately $175 million locked funds
Genesis Trading stated that its derivatives business has risk exposure to FTX, with approximately $175 million locked in FTX accounts.
Earlier, Genesis Trading stated that it does not hold significant risk exposure to FTT and other tokens issued by centralized exchanges, with 95% of the collateral in its lending business consisting of USD or USD stablecoins, Bitcoin, and Ethereum. Although it has trading relationships with FTX, there is no lending relationship. Currently, Genesis Trading's spot and derivatives lending and trading businesses are still operating normally and are reducing risks through hedging and selling collateral, but it has still incurred a loss of $7 million. (Source link)
November 10:
Genesis Trading: Risk has been reduced through hedging and selling collateral, but still incurred a $7 million loss
Crypto market maker and lending company Genesis Trading stated on Twitter that due to anticipated market volatility, it has reduced risk through hedging and selling collateral but still incurred a loss of $7 million.
Genesis Trading stated that it does not hold significant risk exposure to FTT and other tokens issued by centralized exchanges, with 95% of the collateral in its lending business consisting of USD or USD stablecoins, Bitcoin, and Ethereum. Although it has trading relationships with FTX, there is no lending relationship. Currently, Genesis Trading's spot and derivatives lending and trading businesses are still operating normally. (Source link)
