Gemini Earn, the Gemini exchange’s yield farming program, halted withdrawals last week, causing a bank run on the Gemini exchange’s regular deposits. Gemini contracted Genesis Global Capital to handle customer funds for its Earn program.
Genesis Global Capital is a New York-based crypto lending service provider used by institutions and major exchanges. In a September 2022 filing, Genesis claimed it held $2.8B in crypto deposited by its customers. Genesis is owned by Digital Currency Group (DCG), the parent company of Grayscale, the pseudo-ETF which holds $11B in BTC, and CoinDesk, the news outlet that broke news of FTX’s insolvency.
After FTX halted withdrawals following its own bank run, Genesis revealed it had $175M of its customers’ funds locked on FTX. DCG apparently injected $140M into Genesis, but this was obviously not enough to cover the bank run on Genesis’ customers. There are rumors that Genesis was seeking a $1B loan Monday night before halting withdrawals two days later due to what it called “abnormal withdrawal requests.”
It’s still not exactly clear where everyone’s money is, but it doesn’t look good for Genesis’ customer institutions. Following news of Gemini Earn’s problems, Gemini had its own bank run with net outflows of almost $500M in a day. Gemini released a statement apologizing for things going bad and lamenting that Genesis wouldn’t be able to meet the terms of its SLA. Gemini maintains that its exchange is solvent.
GOPAX, a major South Korean exchange, saw the Genesis problems coming but that didn’t save its customers’ funds. GOPAX used Genesis for its GOFi yield farming program, and before Genesis fell apart GOFi had already requested its customer funds back. Unfortunately, Genesis was secretly dead and now the GOFi money is gone too. What's nuts is DCG is GOPAX's largest investor, and not even that helped in the end.
So we’re looking at a potential market-wide crypto collapse set in motion by DCG subsidiary CoinDesk, which may have killed DCG subsidiary Genesis Global Capital, which in turn may have killed DCG’s South Korean exchange, GOPAX. Also DCG’s Grayscale funds are way down. See you next bull run, DCG.