Cryptocurrency lending platform Genesis was looking for an emergency loan of $1 billion from investors. The company seeks these funds before halting withdrawals after massive exposure to the bankrupt FTX exchange.
Genesis seeks $1b in rescue funds
A Wall Street Journal report on Wednesday revealed this fundraiser’s details. The company said it was in a liquidity crunch because it held illiquid assets on its balance sheet.
The fundraising document read that there was a bank run on the platform caused mainly by retailers, institutional clients, and the partners of Genesis, such as Gemini Earn. This run on deposits tested the liquidity of the lender.
A Genesis spokesperson has since confirmed that the crypto lender sought this funding to remain afloat. She noted that the company was in talks with potential investors, and positive conversations were being held.
“Genesis has been exploring all possible options amidst the liquidity crunch resulting from the FTX news. After reviewing a number of options, we made the difficult decision to temporarily suspend redemptions and new loan originations in the lending business so that we can identify the best solution and outcome possible for clients,” the spokesperson added.
Genesis exposure to FTX
As aforementioned, the liquidity crunch faced by Genesis was attributed mainly to the lender’s massive exposure to FTX and Alameda. Genesis issued a loan to Alameda Research, a sister company of FTX. The loan had FTT tokens as collateral.
The price of FTT tokens has since plunged following the situation with the FTX exchange. Genesis halted withdrawals after a high volume of withdrawal requests on the platform. The interim CEO of Genesis, Derar Islim, said that the request for these withdrawals was significantly higher than the company’s existing liquidity.
Islim has also clarified that the liquidity crunch is exclusive to the lending unit of Genesis. The company’s spot, derivatives trading, and custody services have operated normally.
Besides being exposed to FTX and Alameda, Genesis also had exposure to the bankrupt crypto hedge fund Three Arrows Capital. The lender had issued a loan of $2.4 billion to 3AC and its parent company, Digital Currency Group. The lender is claiming $1.2 billion from the collapsed hedge fund.
Genesis is not the only crypto lender in crisis. BlockFi also halted withdrawals recently due to its close ties with FTX. The lender is also allegedly considering filing for bankruptcy.
Venture capital firms that had invested in FTX have started to write off their investment. Temasek, a VC based in Singapore, has written off $275 million, Sequoia Capital has written off its $210 million loan, and Soft Bank Vision Fund has written off its $100 million investment.