Over the past few months, the cryptocurrency ecosystem has faced many significant issues that have affected the market price of major cryptocurrencies and made many crypto projects collapse. Starting with the initial collapse of the TerraLuna project back in May and the recent collapse of the FTX exchange, the crypto industry has suffered significant losses. Now it appears that another crypto-based lending group called ‘Genesis Global Trading’ is suffering from the consequences of these recent collapses as they have stopped all withdrawals as well as new loan creation.
As per a report by CoinDesk, the leading crypto news site, the lending division of the crypto-based Genesis Global Trading has temporarily suspended withdrawals and creation/approval of new loans in the aftermath of the FTX exchange collapse. This announcement was reportedly made by the CEO Derar Islim to customers on a call. The lending arm of the company called Genesis Global Capital provides services to institutional clients and had around $2.8 billion in active loans towards the third quarter of 2022, as per the company’s official website. Genesis Trading operates independently from Genesis Global Capital but serves as the broker/dealer of Genesis Global Capital, as the CEO explained on call. The services of Genesis Trading are ongoing, only the lending arm which is Genesis Global Capital has been affected by this change, the CEO added.
Also Read: The FTX Saga: A Timeline Of Events
The reason the company had to put a stop to withdrawals and new loans is that after the collapse of the FTX exchange, a large number of Genesis customers started to withdraw their funds from the company, which resulted in a liquidity crisis. As a result, the company had to stop further withdrawals and new loans in order to preserve liquidity and not run out of cash, which would have led to a similar situation to the FTX collapse. The CEO also told clients on the call that Genesis is exploring various options and solutions for their lending arm, including looking for sources of fresh liquidity, and that they would reveal a detailed plan by the next week.