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GEMINI HALTS WITHDRAWALS
Genesis revealed that it has $175 million tied up with FTX. This is just the beginning of trying to untangle this FTX web.
What’s happening in the crypto space?
Cryptocurrency has been in the news for all of the wrong reasons lately. Now, the FTX collapse seems to have impacted the entire crypto space.
We have yet to see the full effect of the FTX Bankruptcy
It looks like many casualties will come from the FTX collapse. Days after FTX imploded, it was revealed that BlockFi was also preparing to file for bankruptcy. Plus, the Ontario Teachers’ Pension Plan announced that they lost the $95 million they had invested in FTX.
With Genesis and BlockFi pausing withdrawals in the wake of the FTX news, the short-term future doesn’t look promising for other crypto projects. There are indications that further sell-offs and liquidity issues could arise.
Further regulations could be coming
It’s no secret the SEC and even the Fed would like to see stricter controls on cryptocurrency after witnessing how billions of dollars have been wiped out from this space in 2022.
Michael Barr, a top regulatory official from the Fed, warned that oversights could be coming to cryptocurrency shortly. The Fed’s news release also made this point about possible regulations:
“Over the last several years, we have seen crypto-asset activity grow rapidly and experience periods of significant stress. Some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks—which can include liquidity runs, the rapid collapse of asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering. These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system.”
White House press secretary Karine Jean-Pierre also commented that without proper oversight, cryptocurrency could risk harming Americans. It was made clear that prudent regulation in this space is needed.
What’s the latest Gemini Crypto news?
Many have speculated that the FTX collapse contagion isn’t over yet because many exchanges and funds were tied to FTX. It was reported on November 16 that Gemini had experienced $563 million in customer outflows compared to $78 million in inflows within a 24-hour period.
Gemini announced that customers of the Earn program couldn’t withdraw any money after its partner in the product, Genesis Global, decided to pause withdrawals on the borrowing platform. Gemini Earn is a product used by customers to earn interest on their crypto.
Gemini announced that other products and services, like Gemini Staking in the Grow, will operate normally. The company brought up how they are a full-reserve exchange and custodian.
They assured customers that funds held on the Gemini exchange are held 1:1 and can be withdrawn at any time.
Why did Gemini pause withdrawals?
The issue is that Genesis is the leading partner of the Earn program, where investors can stake their cryptocurrency in exchange for annual yields. With Genesis suspending withdrawals, there appears to be nothing that Gemini can do now.
Genesis cited “extreme market dislocation” and “loss of industry confidence caused by the FTX implosion” as the reasons why they were suspending withdrawals.
It’s worth noting that just one year ago, Gemini raised $400 million in growth equity funding, bringing the company to a valuation of $7.1 billion.
It was announced that Gemini is working with Genesis to allow users to redeem the funds as soon as possible. Gemini offered the following encouragement in its latest statement on November 16:
“We are disappointed that the Earn program SLA will not be met, but we are encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfill their obligations to customers under the Earn program. We will continue to work with them on behalf of all Earn customers. This is our highest priority. We greatly appreciate your patience.”
Customers of Gemini are anxiously awaiting an update as there are serious liquidity concerns. The company took to Twitter to announce the Gemini Trust Center:
“1/ We are pleased to announce the launch of the @Gemini Trust Center, a dashboard of metrics for the funds we hold on the Gemini platform and on your behalf, as well as other important data and information.”
Who is Genesis global capital?
The owner of Genesis is Digital Currency Group (DCG), the parent company of CoinDesk.
Genesis plays a vital role in this Gemini story because the company announced on November 11 that they had about $175 million locked in with FTX but that this wouldn’t impact daily operations for them.
Five days later, Genesis announced that they were pausing withdrawals.
There are fears and rumors that Genesis could be filing for bankruptcy next. The crypto lender denied these bankruptcy rumors late on November 21. A Genesis spokesperson released the following statement to Reuters:
“We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing.”
The timing is interesting because a Wall Street Journal story leaked that Genesis attempted to reach out to Binance about obtaining funding.
Many reports have circulated that Genesis has been struggling to find the cash it needs for the lending unit, as it may allegedly have to file for bankruptcy if it can’t obtain the funding. We will have to monitor this situation as it plays out.
What’s next for crypto?
Investors have to wait and watch how everything unfolds as this FTX bankruptcy has sparked concerns of a contagion that could impact the entire space. The prices of almost every form of cryptocurrency have dropped over 60%.
A luna collapse earlier this year saw about $60 billion get wiped out from this space. With all of this money leaving the crypto industry, it’s unlikely that investors will continue to invest like they did in 2021 when there was a positive sentiment about the future of cryptocurrency.
Crypto exchanges and lending firms have been dealing with unprecedented pressure since the FTX implosion. With FTX and its impact on the crypto space, there are worries about liquidity and what could happen next.
It’s also worth noting that some platforms are doing better than others. Lender Nexo said that they had no ties to FTX.
In addition, SEC Chair Gary Gensler has been mentioned in the media for this lack of knowledge about the FTX collapse. Rumors are swirling about how Congress will approach Gensler for how he missed such a massive fraudulent operation.
This FTX implosion came just a month after the SEC fined Kim Kardashian for promoting a crypto token on her social media page.
$900 Million Owed Genesis Customers
Report Claims Genesis Owes the Winklevoss-Operated Exchange Gemini $900 Million
FT reports that the centralized crypto asset exchange created by the Winklevoss brothers is owed $900 million and reportedly Genesis Global Capital is the debtor. People familiar with the matter told FT that Gemini was in the process of trying to recover the funds from Genesis and the company’s parent firm Digital Currency Group (DCG).
The report further alleges that Genesis is still attempting to solicit funds from investors to ease financial burdens. While reports noted that Genesis was trying to get $1 billion in funding, FT details that it’s been cut down to roughly $500 million. The news follows the report published by Barron’s author Joe Light that noted Genesis is reportedly being probed by state securities regulators.
Furthermore, on Nov. 22, 2022, the New York Times (NYT) reported that Genesis Global Capital hired a restructuring adviser. NYT detailed that Moelis & Company was hired by Genesis to “explore options including a potential bankruptcy,” according to three people familiar with the matter. FT’s report about the issues between Genesis and Gemini indicates that FT’s sources say Gemini is in the midst of creating a creditors’ committee.
Promises Made to Pay
Last month, Gemini revealed that customers using the platform’s Earn program could not withdraw funds. “We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible,” Gemini said on Nov. 16, 2022. Gemini insisted that customer funds on Gemini could be redeemed at a 1:1 rate at any time and the exchange’s other products and services were normal.
Gemini’s message was published the same day Genesis Global Capital detailed that it was pausing withdrawals and new loan originations. DCG founder Barry Silbert detailed in a letter to shareholders on Nov. 22 that it was important to note the lending arm of Genesis has had “no impact on Genesis’ spot and derivatives trading or custody businesses, which continue to operate as usual.” Silbert also reassured shareholders that his firm will “continue to be a leading builder of the industry.”
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