Last Wednesday, the cryptocurrency exchange Gemini went offline due to an unrelated server issue. The announcement of pausing withdrawals via the Gemini Earn product followed, right after the prime broker, Genesis, halted users’ redemptions and creation of new loans.
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Genesis and Gemini are owned by the parent company Digital Currency Group (DCG). While Genesis came with a statement of material exposure to FTX with $175M in locked funds on the platform, Gemini’s representatives didn’t state the same, basically repeating Genesis’ disclosure in a Nov. 16 blog post:
We are aware that Genesis Global Capital, LLC (Genesis) — the lending partner of the Earn program — has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days. We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days.
As of Nov. 22, the problem is Gemini’s users still don’t know when the Earn product will work again. Gemini officials announced on Twitter today that the exchange’s still in the process of finding the solution with Genesis.
Gemini Earn product provides users with redemption from 0.7% to 8%, from locking up assets on the platform.
The Genesis and Gemini link cannot be understated. It’s essential to add that after Genesis revealed a $175M hole in its balance due to FTX, DCG infused $140M equity in the subsidiary broker.
Gemini stands in its reassurance of the first-and-foremost run of the Earn program.
This remains our highest priority and we understand Genesis and DCG remain committed to exploring every possible option to fulfill their obligations to Earn users.
The story continues with eyes on Genesis, which is currently searching for an investment, cutting the required sum from $1M to $500K. “We have no plans to file bankruptcy imminently,” a Genesis representative told Bloomberg. “Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors.”