Genesis Global Capital, Genesis, DCG discussed on The Breakdown
The breakdown is sponsored by nexo IO, circle, and kraken, and produced and distributed by coindesk. What's going on guys? It is Wednesday, November 16th and today we are catching up on FTX contagion as well as some interesting things from the macro world. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a listen, give it a review, or if you want to dive deeper into the conversation. Come join us on the breakers Discord. You can find a link in the show notes or go to bit LY slash breakdown pod. All right guys, how is everyone doing out there? Now, I mentioned it yesterday, but I wanted to tell you again about the upcoming grateful for Bitcoin series next week. I've started recording those interviews as of today, including one about Bitcoin gas flare mining today that I think you're really going to like. I also want to say welcome once again to kraken as a partner for the breakdowns back to basics theme throughout the rest of this year. Now today, I want to catch up on a few of the macro stories we've missed as we've been very understandably focused on the crypto industry, but unfortunately first we do have to look at the latest contagion from FTX collapse. Genesis trading is one of the larger players in the institutional crypto space. They're one of The Crown jewels in the digital currency group empire, which should be noted also includes coin desk. They're lending arm is called genesis global capital. And at the end of the third quarter, it had $2.8 billion in total active loans. Now, genesis has had a rough year. They suffered 9 figure losses a few $100 million through their exposure to three arrows capital and Babel finance earlier this year. In June, Michael morrow said, as we already stated on June 17th, we mitigated our losses with a large counterparty who failed to meet a margin call to us. We sold collateral hedged our downside and moved on. Our business continues to operate normally and we are meeting all of our clients needs. Now still losing a few $100 million is going to have some consequences and in the wake of all this CEO Michael morrow stepped down. Perhaps unsurprisingly then when FTX collapsed, one of the big questions was what exposure genesis had. Initially, they said they only had something like $7 million of exposure, but then that was revised up to about a $175 million in locked funds in its FTX trading account. Because of this last week, DCG decided to strengthen their balance sheet with an equity infusion of a $140 million. In spite of this, last night, rumors of solvency issues were perhaps liquidity issues, started to make their way to Twitter. Satoshi stacker wrote breaking, there are rumors about genesis trading being insolvent despite receiving an infusion of a $140 million a few days ago. The parent company of genesis DCG, which is also the parent company of grayscale. Grayscale is one of the largest holders of Bitcoin worth $11 billion. This morning it was revealed that the issue was not with genesis trading, but with genesis capital. Frank chaparro from the block tweeted genesis just held a 7 minute call with clients to let them know withdrawal requests for genesis capital have exceeded their liquidity profile. CEO says he's working on a plan with advisers to fix their liquidity profile and serve clients. Amanda cowie vice president of communications and marketing at DCG released a statement that said, today, genesis global capital, genesis lending business, made the difficult decision to temporarily suspend redemptions and new loan originations. This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion. This decision impacts the lending business at genesis and does not affect genesis trading or custody businesses. Importantly, this decision has no impact on the business operations of DCG and our other wholly owned subsidiaries. Still one of the fallouts from the genesis capital withdrawal shutdown is the Gemini earn program. The team at Gemini released a statement this morning that says, we are aware that genesis global capital, the lending partner of the urn program, has paused withdrawals and will not be able to meet customer redemptions within the service level agreement of 5 business days. We're working with the genesis team to help customers redeem their funds from the earned program as quickly as possible. We will provide more information in the coming days. This past week has been an incredibly challenging and stressful time for our industry. We are disappointed that the earned program SLA will not be met, but we are encouraged by genesis and its parent company digital currency group's commitment to doing everything in their power to fulfill their obligations to customers under the urn program. We will continue to work with them on behalf of all earned customers. This is our highest priority. We greatly appreciate your patience. My duties from 6 man ventures said to be clear, this isn't a hit to Gemini's deposit base. But it's a hit to the market value prop and trust surrounding the concept that customers can earn safe reliable yield on their crypto via a regulated exchange. Not trying to FUD here and I expect Gemini deposits are fine. End quote still, after everything that went down with FTX, what people want is details. Jason Choi wrote no exact figures and still having issues post DCG infusion are not confidence inspiring. Bantu responded to Jason saying fully operational, but temporarily halting origination withdrawals. This seems like another way of saying insolvent. Jason responded, I don't know, just repeating exactly what was said. Could be a duration mismatch could be insolvency. If former good. If latter, pray. Want to keep more profits when trading? Get the best possible prices and trade with 50% lower fees. On nexo pro. The new spot and futures trading platform uses aggregated liquidity of over 3000 order books collected from multiple sources. Utilizing the complete nexo suite allows you to earn interest and borrow funds as you wait for the next trade setup. Visit pro nexo dot IO. That's PRO dot N EXO dot IO and sign up today. This episode is brought to you by circle. The sole issuer of USD C and a leader in crypto that's held to a higher standard. USD C is a fast safe and efficient way to send money around the globe. 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Now, over the last couple of hours, as I was working on the show, the situation with Gemini seemed to get worse. Numerous commentators noticed that it wasn't just earned but the entire exchange that seemed to be down. There were outages across the web UI, the mobile app that earned program the exchange trading engine, numerous APIs, and more. However, according to the latest tweet from Gemini, it was all about AWS. Quote, we experienced an Amazon Web Services EBS outage with one of our primary databases. We have restored the database and are bringing the exchange back up. Alex Krueger gives probably what's the simplest explanation saying, guessing Gemini withdrawals not working at the moment because Gemini earn got shut down due to genesis lending, leading everyone to withdraw at the same time, equals website issues. Either way, please DYOR if you have your funds in Gemini. Now obviously we will continue to keep an eye on this, but in the meantime, it is probably a good time to withdraw your assets to self custody if you haven't done so already. Now with that let's shift to some of those macro stories that I mentioned we haven't had a chance to cover. And to be clear, there's not necessarily a theme here just the latest things that are important to note. Let's start with the CPI.