ENCOURAGING ANGELS: Genesis Trading – Give Us at Least $1 Billion or We are Looking at Bankruptcy

By Stan Szymanski

Two weeks ago in ‘Are the SEC and The Federal Reserve Part of the Story of Bankrupt FTX? Derivatives Become an Issue’, I mentioned that Crypto lending and trading  concern Genesis Trading had $175 Million of its derivatives business tied up in an FTX trading account. At the time, Genesis said…’our operating capital and net positions in FTX are not material to our business’. On the same day I posted that writing, Genesis was given an ‘equity infusion’ by its parent (DCG) as I wrote Last week in ’Crypto Conglomerate Digital Currency Group (DCG) is at the Epicenter of the Cryptocurrency Earthquake’:

…’The lending arm of crypto investment bank Genesis Global Trading is temporarily suspending redemptions and new loan originations in the wake of FTX’s collapse, Interim CEO Derar Islim told customers on a call Wednesday.’…(Coindesk ‘Genesis’ Crypto-Lending Unit Is Halting Customer Withdrawals in Wake of FTX Collapse’ 11/16/22).

Then we found out …’Crypto investor Digital Currency Group is giving an equity infusion of $140 million to Genesis Global Trading, a company within its portfolio…“While the operation of our lending and trading businesses has not been impacted by recent market events, Genesis has taken steps to strengthen its balance sheet with an additional equity infusion of $140M from our parent company, Digital Currency Group,” Genesis told clients in an email’…

First they tell you that the derivatives money tied up in FTX is no big deal. Then, you find out that the parent of Genesis (DCG) infused $140 million into Genesis after the failing of FTX. Why did they really need the $140 million?

Today’s entry into the Genesis saga is a report from Bloomberg:

…’Digital-asset brokerage Genesis is struggling to raise fresh cash for its lending unit, and it’s warning potential investors that it may need to file for bankruptcy if its efforts fail, according to people with knowledge of the matter.’…

Genesis has spent the past several days seeking at least $1 billion in fresh capital, said the people, who asked not to be identified because discussions are private. That included talks over a potential investment from crypto exchange Binance, they said, but funding so far has failed to materialize.’…

When Bloomberg states…’ Genesis is struggling to raise fresh cash for its lending unit’…we can now assume that the problem lies with the lending side of the business. Lending typically involves debt, leverage and credit risk of who is asking for the loan.

What are we going to find out about Genesis that we didn’t know before? Will it be that like the business practices of FTX that Economist Martin Armstrong described in a blog today?

…What people must understand is that there is no record of these funds existing anywhere. No one knows who worked for FTX, as all basic information has been shielded. These mysterious employees were encouraged to use software that automatically deleted messages, and they often spoke in code.’…(FTX Deep Fake- The Funds are Gone-Martin Armstrong 11/22/22)

So first, Genesis told us that they had $175 million of their derivatives business tied up in the now defunct FTX and that …’net positions in FTX are not material to our business’…

Then Genesis suspended redemptions and loan origination and received a $140 million equity infusion from their parent, DCG.

Today, Genesis is claiming that while they are at their weakest point, that they are worthy of at least $1 Billion in brand spanking new money from investors or they might need to file for bankruptcy.

If Genesis is on the verge of bankruptcy, after this and the catastrophe of FTX,  how far behind can a failure or even a meltdown at Genesis Tradings’ parent, Digital Currency Group be?

It feels as if things are cascading out of control. Please note that this all started with a problem in the Genesis derivatives position because of the collapse of FTX. It is possible that other derivative positions are beginning to teeter and cause problems that are not public knowledge today. Tomorrow is another day.

The Genesis Trading soap opera has made it through another day. The real challenge is to see if they can make it through another tomorrow.

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Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.