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Another crypto broker temporarily suspends repayment and issuance of new loans in its lending business.
Genesis said on Wednesday it has placed a temporary veto on lending to its customers. This is another blow to the industry after the collapse of major crypto exchange FTX last week.
On its official Twitter account, the company said it had made a "difficult decision" to temporarily suspend repayments and new loans in the lending business. A spokesman for the company assured that the team is "working hard" to secure the necessary liquidity to meet our customer lending obligations.
Investment parent company Genesis Digital Currency Group (which also owns crypto asset manager Grayscale, which was widely heard a year ago), said the decision to suspend the buyback was made in response to the extreme market turmoil and loss of industry confidence caused by the FTX collapse.
The suspension of work at Genesis "does not affect the business operations of DCG and our other wholly owned subsidiaries," Digital Currency Group said on Twitter.
Apparently, the company's problems are based on the fact that Genesis Trading derivatives have about $175 million worth of locked funds on FTX.
FTX itself is desperately fighting for survival.
For example, FTX has received legal action from investors alleging that the company's profitable crypto accounts violate Florida law, according to court documents.
The proposed class action, filed late Tuesday in Miami, alleges that FTX income accounts were unregistered securities that were traded illegally in the US.
The lawsuit alleges that when the cryptocurrency exchange faltered due to liquidity issues, US investors suffered $11 billion in damages.
The company itself is making attempts to change jurisdiction to the Bahamian.
So, on Tuesday it became known that the liquidators of FTX in the Bahamas said they were "rejecting the legality" of the bankruptcy proceedings of the cryptocurrency exchange in the United States.
As a reminder, FTX and 130 subsidiaries filed for bankruptcy in the US on November 11, leaving about 1 million customers and other investors facing billions of dollars in combined losses.
Now, its subsidiary FTX Digital Markets in the Bahamas has been the first to initiate liquidation proceedings, and its court-appointed liquidators said late Tuesday that their case could "impact" FTX's reorganization efforts in the US.
The liquidity crisis has worried the major players in the industry.
Binance CEO Changpeng Zhao said on Wednesday that industry players are showing significant interest in a recovery fund his company is planning to launch to help crypto projects struggling with liquidity shortages following the collapse of rival FTX. Well, despite the disagreements between Zhao and Bankman-Fried, the founder of Binance is not sitting idly by. However, the crypto exchange itself is now under the close supervision of US regulators due to ties with Iran.
While this is all at the level of plans. At the very least, Zhao said he did not have exact data on the size of the recovery fund.
Zhao said that Binance has good reserves, but he did not say how much the company will contribute to the fund. He also noted that the cryptocurrency does not need to be saved. "Crypto will be fine," he said.
We expect more information about the fund to be available over the next two weeks.
Obviously, such a fund (by analogy with national deposit guarantee funds) is a necessary next step for the stable operation of the industry in the future.
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