Genesis Tried (and Failed) to Get $1B Loan to Cover Liquidity Crunch

According to a recent report, the Wall Street Journal got its hands on an internal document detailing Genesis’ drive to raise emergency funds. Allegedly, the company was seeking $1 billion to cover a liquidity crunch caused by the collapse of FTX.

Genesis Looking to Cover a Liquidity Crunch

The report indicates that Genesis is facing a severe liquidity crunch in the aftermath of the FTX collapse. Allegedly, it was seeking to raise $1 billion before 10 am on Monday. According to WSJ, potential investors were offered an ownership stake in one of the subsidiaries of the Digital Currency Group—the parent company that recently injected $140 into the lender—a minority stake in GCG, or an ownership stake in Genesis itself.

The report also indicates that the company didn’t raise the money but that a spokesperson clarified that the document was “outdated” stating that the company is having “very positive conversations” with investors nonetheless. At the time of writing, the withdrawals from Genesis—initially halted on Wednesday—remain frozen.

The $1 billion figure is the latest number in what appears to be an ever-escalating exposure of Genesis to the FTX collapse. The company made three separate announcements on its Twitter page which may indicate an increasingly dire situation. On November 8th, the company claimed “no material net credit exposure”

A day later, Genesis announced “a total loss of ~$7M across all counterparties, including Alameda.” Another day later, on November 10th, the firm added it “has ~$175M in locked funds in our FTX trading account” which resulted in the $140 million injection from GCG. Finally, on November 17th, WSJ revealed the company was seeking to and failed to raise $1 billion to cover the crunch over the weekend.

The FTX Contagion

While the full extent of the now-double FTX bankruptcy contagion remains undeterminable at the time of writing, several companies have reported facing issues in its wake. Gemini Earn—the chief partner of Genesis—also halted its withdrawals on Wednesday. Additionally, the situation with Gemini caused a temporary panic as its site went dark for about an hour, however, its functionality was restored.

On November 11th, the day FTX filed for chapter 11 bankruptcy, BlockFi announced it was pausing withdrawals “until there is further clarity”. Since then, there have been numerous reports of the company facing “imminent bankruptcy”. Both Gemini Earn and BlockFI are owned by the Gemini Trust Company, LLC.

Several other companies have acted in a similar fashion amidst the FTX contagion. On November 15th, both SALT Lending and the Japanese crypto exchange Liquid Global halted user withdrawals. Furthermore, several companies including Singapore’s Temasek announced they were writing off their entire FTX investments.

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