Genesis, a renowned crypto lending and custody service that recently halted consumer withdrawals, has been alleged to owe its debtors more than $1.8 million according to reports from CoinDesk.
The report was made known to the public shortly after Gemini made an announcement on Sunday that it has set up a Creditors’ Committee to recoup the $900 million loan it gave to Genesis and its parent company, Digital Currency Group (DCG).
Barry Silbert, the founder of DCG, said in a letter to its investors that the loan was made after DCG assumed Genesis’ risk from the Three Arrows Capital default.
The report stated that another group of Genesis creditors with a total of $900 million in debts, is represented by the legal firm Proskauer Rose.
Aside from the Proskauer group, Kirkland & Ellis is defending another group of Genesis creditors. However, there is no information on the amount of money owed to this group.
Genesis in the Face of Financial Crisis
The embattled firm said it was stopping customers’ lending withdrawals following the abrupt collapse of the FTX exchange platform even though it claimed that it had no lending relationship with FTX and Alameda Research in the heat of the FTX liquidity crisis.
To reemphasize, Genesis has no ongoing lending relationship with FTX or Alameda.
— Genesis (@GenesisTrading) November 10, 2022
The firm added that the FTX implosion has precipitated abnormal withdrawal requests from its customers which exceeded the firm’s liquidity at the time.
In an effort to remedy the situation, Genesis stated in a Twitter thread that it has hired top advisers in the field to investigate the possible solutions on how to navigate the difficult market situation.
We recognize how challenging this past week has been due to the impact of the FTX news. At Genesis we are entirely focused on doing everything we can to serve our clients and navigate this difficult market environment.
— Genesis (@GenesisTrading) November 16, 2022
The firm also added that it is seeking new sources of liquidity to cushion the effect the collapse of FTX has brought upon its lending business.
The DCG subsidiary is under pressure from its investors to disclose the firm’s financial situation, but the company has assured its customers that it has no plans to file for bankruptcy protection.
While investors and stakeholders lament the loss of their funds in Genesis, Ledn, a Canadian mortgage service provider, claims it will be unaffected by Genesis’ decision to halt withdrawals because it stopped working with Genesis in October.
1/ Ledn has no exposure to Genesis and remains fully operational. https://t.co/icPz6TS2Ic
— Ledn (@hodlwithLedn) November 16, 2022
Genesis is not the only crypto firm that has paused customers’ withdrawals in the heat of the ongoing Dwindling Crypto market.
For example, Celsius, a leading lending platform, paused all customers’ withdrawals, derivatives, and transfers between accounts on its platform in June.
