Crypto lender Genesis struggles to enable withdrawals for users amid spreading FTX contagion


  • Genesis, a US-based crypto lender informed users that withdrawal freeze won’t be resolved for weeks to come. 
  • FTX exchange collapse and contagion fear has spread in the crypto ecosystem, the derivatives business of Genesis lost $175 million. 
  • Analysts believe Genesis’ collapse could land a major blow to parent company Digital Currency Group (DCG). 

Genesis, a crypto lending firm, is working on preserving client assets and strengthening liquidity. The FTX contagion spread to venture capital firm Digital Currency Group’s (DCG) venture Genesis. Genesis told users in a letter that it is seeking to avoid a bankruptcy filing and needs weeks to form a plan. 

Also read: FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

Genesis customers could wait weeks for withdrawals 

Genesis, a US-based crypto lending firm issued a letter to customers on December 7. Derar Islim, the interim CEO of Genesis suggested that the firm’s withdrawals could remain frozen for weeks to come. 

In the letter, the firm states that Genesis is committed to being as “transparent as possible,” with its customers throughout the process. The interim CEO informed users that Genesis is in consultation with experienced advisers and owner Digital Currency Group (DCG). 

Genesis froze withdrawals on November 16, 2022, shortly after FTX exchange’s collapse and bankruptcy filing. Genesis derivatives business has $175 million with FTX exchange that may or may not be recovered. Losing hundreds of millions to the exchange’s collapse, Genesis was hit by the spreading FTX contagion. 

Parent company DCG delivered a $140 million cash infusion to Genesis, however this was not enough to resolve the firm’s liquidity issues. The lending business reportedly sought $1 billion in emergency funds shortly after freezing customer withdrawals. 

The crypto lender failed to raise the funds and reports from experts revealed that Genesis is heading towards bankruptcy for lack of external support. DCG’s crypto lending arm then onboarded restructuring lawyers to avoid bankruptcy and work out a plan to return customer funds. 

Withdrawal freezes in 2022 are followed by bankruptcies

Crypto firms Celsius, Voyager, FTX and BlockFi started with freezing withdrawals and ended up filing for bankruptcy. This has been the trend in the crypto ecosystem in 2022. Genesis is working with a group of experts to fight a similar fate, however the contagion has spread to Gemini Earn. 

Genesis reportedly owes $900 million to Winklevoss twins’ Gemini Earn, a crypto lending product. Users of other arms of Genesis, including its trading and custody services are not impacted and the exchange is working on a solution for the customers of Gemini Earn.

Experts believe DCG could suffer fall out from Genesis’ collapse

Cryptocurrency experts are debating whether Genesis’ collapse could affect parent company Digital Currency Group. Ram Ahluwalia, CEO and co-founder of crypto-native investment advisor Lumida, and Samuel Andrew, crypto author and analyst debated the matter on episode 429 of cryptocurrency podcast ‘Unchained.’

The two firms are facing a range of suboptimal outcomes in the face of massive debt. Ahluwalia and Andrew discussed how Genesis’s withdrawal freeze contributes to the spreading FTX exchange contagion. 

The co-founder of Lumida is of the opinion that Genesis’ lending product needs to be shut down and there is a risk of enforcement action from regulators. It is a challenge for creditors to be made whole after the recent fallout at the crypto lending firm. It remains to be seen whether Genesis’ situation will trigger the collapse of DCG and Winklevoss twin’s Gemini exchange and its lending products. 

Cameron Winklevoss, co-founder of Gemini shed light on the current situation in a recent tweet:

He stresses on finding a resolution for Earn users to redeem their funds after Genesis’ withdrawal freeze. 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Weekly Forecast: BTC nosedives below $95,000 as spot ETFs record highest daily outflow since launch

Bitcoin Weekly Forecast: BTC nosedives below $95,000 as spot ETFs record highest daily outflow since launch

Bitcoin price continues to edge down, trading below $95,000 on Friday after declining more than 9% this week. Bitcoin US spot ETFs recorded the highest single-day outflow on Thursday since their launch in January.

More Bitcoin News
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers

Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers

Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins. 

More Bitcoin News
Solana Price Forecast: SOL’s technical outlook and on-chain metrics hint at a double-digit correction

Solana Price Forecast: SOL’s technical outlook and on-chain metrics hint at a double-digit correction

Solana (SOL) price trades in red below $194 on Friday after declining more than 13% this week. The recent downturn has led to $38 million in total liquidations, with over $33 million coming from long positions.

More Solana News
SEC approves Hashdex and Franklin Templeton's combined Bitcoin and Ethereum crypto index ETFs

SEC approves Hashdex and Franklin Templeton's combined Bitcoin and Ethereum crypto index ETFs

The SEC approved Hashdex's proposal for a crypto index ETF. The ETF currently features Bitcoin and Ethereum, with possible additions in the future. The agency also approved Franklin Templeton's amendment to its Cboe BZX for a crypto index ETF.

More Cryptocurrencies News
Bitcoin: 2025 outlook brightens on expectations of US pro-crypto policy

Bitcoin: 2025 outlook brightens on expectations of US pro-crypto policy

Bitcoin (BTC) price has surged more than 140% in 2024, reaching the $100K milestone in early December. The rally was driven by the launch of Bitcoin Spot Exchange Traded Funds (ETFs) in January and the reduced supply following the fourth halving event in April.

Read full analysis
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

BTC

ETH

XRP