Genesis warns of bankruptcy if it can't raise $1 billion

Genesis Global Trading has reportedly been telling investors that Genesis may need to file for bankruptcy if its attempts to raise at least $1 billion in new capital don't succeed. The firm revealed its exposure to FTX last week, halting withdrawals from its lending service and acknowledging that its derivatives arm has $175 million in funds locked in the bankrupt exchange.

The Wall Street Journal then reported that Genesis had been seeking a $1 billion emergency loan due to a "liquidity crunch due to certain illiquid assets on its balance sheet".

The halting of withdrawals from Genesis' lending business has already had major downstream impacts, as it is a major partner of other crypto lending services. Gemini and Coinhouse both followed Genesis in suspending withdrawals, as did other firms including Donut and GOPAX.

A Genesis bankruptcy would be a monumental event in crypto, with enormous downstream exposure.

Grayscale Bitcoin Trust suffers due to FTX collapse and doubts over reserves

Chart showing the premium/discount of the GBTC fund. The fund started at a premium of over 60% in 2017, and traded at a premium before crossing into a discount in early 2021. The discount has continued to grow since, and has recently dipped to 45%GBTC discount or premium (attribution)
Grayscale Bitcoin Trust (GBTC), the largest publicly traded crypto fund, hit record lows in the wake of the FTX collapse. The fund was trading at nearly a 50% discount on the underlying Bitcoin asset, as holders rushed to sell off their GBTC holdings.

This was not helped by Grayscale's response to those in crypto who were pushing Grayscale to follow suit with some other crypto platforms and publish proof of reserves. Grayscale announced that "due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure". They did not elaborate on what these "security concerns" might be, and stoked fears in some that the company might not have the backing they ought to have.

Grayscale published a letter from Coinbase that basically said "we have Grayscale's assets, we promise", which did not seem to assuage the fears that have formed around centralized entities promising they have the assets they claim. This is understandable, given that FTX made similar promises, only to collapse.

Coinhouse suspends "savings accounts" due to Genesis suspension due to FTX collapse

The French crypto broker Coinhouse announced that they would be suspending withdrawals from their crypto "savings account" product. Coinhouse partners with Genesis to offer the service, and Genesis recently suspended their service due to the FTX collapse. As a result, services that relied on Genesis, including Gemini and now Coinhouse, are halting their own services as the dominoes continue to fall.

Australian Securities Exchange scraps its $167 million, seven-year-long blockchain project

The Australian Securities Exchange (ASX) has finally pulled the plug on their project that would have replaced the aging CHESS system that is used for transfer and settlement. The group had spent seven years and AU$250 million (US$167 million) on a private blockchain project, which has suffered repeated delays and setbacks. A recent, third-party report by Accenture on the project estimated that it was only 63% complete, and was excessively complex, "including in the way ASX requirements interact with the application and underlying ledger". The project has grappled with issues including lack of throughput to settle trades.

ASX will write off the AU$245–$255 million (US$164–$170M) they have poured into the project, and start again on designing a replacement for the CHESS system.

Class action lawsuit filed against celebrities who promoted FTX

Larry David, Tom Brady, Gisele Bundchen, and Steph CurryLarry David, Tom Brady, Gisele Bundchen, and Steph Curry all promoted FTX (attribution)
A class action lawsuit has been filed against Sam Bankman-Fried and a slew of celebrities who helped to promote FTX as a safe place to hold and trade crypto. Defendants include Tom Brady, Gisele Bündchen, Steph Curry, Shaquille O'Neal, David Ortiz, Naomi Osaka, and Larry David.

The suit alleges that the celebrities violated the anti-touting provisions of securities laws by failing to disclose the nature, scope, and amount they were compensated to promote the platform.

Nigerian startup Nestcoin has nearly all funds locked in FTX, announces layoffs

Nestcoin, a Nigerian startup that both builds and invests products they hope will "democratis[e] access to economic opportunity for everyday people in frontier markets", has announced that they will lay off more than 50% of their nearly 100 employees. Remaining employees will see their pay slashed by 40%, and the company CEO plans to take no compensation at all.

Nestcoin had nearly all of the funds remaining from their $6.45 million funding round locked in FTX — approximately $4 million.

Gemini halts withdrawals from their lending service

The Gemini cryptocurrency platform announced that they would be pausing withdrawals on their lending platform. This is because they partner closely with Genesis' lending products, which halted withdrawals shortly before.

The company said in a blog post that they were "working with the Genesis team" to restore withdrawals. Like Genesis, they tried to urge that the issue would not affect other Gemini products. However, a service outage that same day did little to strengthen trust in the company.

Genesis crypto lending service halts withdrawals

The crypto lending portion of Genesis Global Trading announced they would be halting withdrawals in the wake of the "extreme market dislocation and loss of industry confidence caused by the FTX implosion". On Twitter, they wrote that "FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity."

They urged in their announcement that the decision would not impact their trading or custody businesses — though if I was a user of their other services I might not be feeling so reassured given crypto companies' poor track record of segregating operations.

Genesis has about $2.8 billion in total active loans as of the end of September 2022.

This is not the first crisis for Genesis this year. The firm lost hundreds of millions due to exposure to the Three Arrows Capital collapse, and in August announced layoffs of 20% of their employees.

Coachella NFTs stop working due to FTX collapse

A concert poster for Coachella 2015, featuring a bird with intricate feathers walking through a patch of plants and circus rides in a desertCoachella: Desert NFT (attribution)
Coachella partnered with FTX to sell a collection of NFTs in February, ultimately raking in around $1.5 million. The NFTs were paired with physical items — Coachella passes, art prints, and photo books — and the NFT owners had the option to "redeem" their NFT to receive the item. However, all of this was done through FTX, and with FTX no longer fully operational, redemptions are no longer possible. The FTX server storing the artwork for the NFTs was also intermittently available, so holders reported seeing broken images when going to view their NFT.

Ten of the NFTs in the collection came with lifetime passes to Coachella, and sold for six figures. Each year, the NFT holder has to go through the redemption process to obtain their festival pass.

Many of the token owners bought their NFTs with FTX and simply left them in their accounts on the platform. Some were able to transfer their tokens before FTX's NFT platform stopped operating, but many did not.

Australian crypto exchange Digital Surge suspends withdrawals

The Brisbane-based cryptocurrency exchange Digital Surge announced that they would be suspending deposits and withdrawals. "Due to the impact of FTX Australia's administration, we are not able to operate business as usual and have suspended all deposits and withdrawals until further notice," they wrote. They also disclosed in an email that they had "some limited exposure to FTX".

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