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Genesis freezes lending division due to ‘FTX implosion', impacts Gemini

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(Kitco News) - Genesis is halting all customer redemptions and new loan originations at their lending division as the fallout from FTX spreads through crypto credit markets.

The company’s crypto-lending arm, Genesis Global Capital, had $2.8 billion in active loans at the end of Q3 2022. Genesis Interim CEO Derar Islim told institutional clients about the lending freeze during a conference call on Wednesday morning.

Venture capital firm Digital Capital Group (DCG), the parent company of Genesis, tweeted Wednesday morning that the decision was made “in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion.”

Islim said the move does not impact Genesis’ custody and trading arms, as Genesis Trading is independently capitalized and operated separately from Genesis Global Capital, and that the company intends to share plans for the lending unit with clients sometime next week.

DCG also owns Grayscale, whose $11 billion in bitcoin make them one of the largest holders in the world. DCG is also the parent company of CoinDesk.

Last week, Genesis revealed that it had $175 million stuck in its FTX account, prompting DCG to give the company an equity infusion of $140 million.

Wednesday morning’s announcement provoked a quick response from crypto exchange Gemini, which is partnered with Genesis and whose clients are impacted by the lending freeze.

“We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible,” they wrote, adding that they were “disappointed” that Genesis’ obligations to their clients could not be met under the SLA, but they were “encouraged” by the efforts made by Genesis and DCG to address the problems.

“This does not impact any other Gemini products and services,” they wrote. “All customer funds held on the Gemini exchange are held 1:1 and available for withdrawal at any time.”

Gemini said they would provide more information in the coming days.

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