Collapse of Genesis crypto lending unit

[Brendan Burgess]

I am trying to understand what happened here and it's like piecing together a jigsaw. But I still have a few missing pieces.

Genesis is a Crypto Broker ( like Coinbase or FTX ?)
They had three subsidiaries

1. Trading - not affected
2. Custody - not affected
3. lending unit - gone into Chapter 11

Genesis was the biggest creditor of FTX.


Gemini is a crypto exchange owned by the Winklevoss brothers
Gemini is regulated by the SEC
They had a product called "Earn" (Some dispute over whether this is a regulated product)
340,000 of Gemini's customers put in $900m of real money into Earn in the expectation that they would get a return of 7% a year.
Gemini lent(?) that money to Genesis's lending unit.
Now these customers can't get their money back.


1) Is a crypto broker the same as a crypto exchange?
2) Who did Genesis lend to other than FTX?
3) Why would they lend crypto? Is it so that the borrower can speculate?
4) Aren't the Winklevoss brothers multi-billionaires? Why don't they just bail out their customers who have lost money?

I have little sympathy for people who expect to get a return of 7% without taking huge risk, but against that, many ordinary people are blinded into making stupid decisions in the crypto space.

 

[Brendan Burgess]

This is a good article on it.

The Winklevoss twins are in a big mess—and it has to do with crypto

“The idea in your head that you can quietly hide in your ivory tower and that this will all just magically go away, or that this is someone else’s problem, is pure fantasy,” Cameron Winklevoss wrote to former friend Barry Silbert.

finance.yahoo.com

It seems that the twins' various businesses are not doing that well.

One of the replies to this article articulates how I feel about it.

I keep trying to follow the money and everywhere I look, there isn't any. I am no longer able to follow the bouncing ball. Every time another company becomes involved in a transaction, it costs money. There becomes a long chain of those involved and when one link breaks, the house of cards falls.

 

[Rasputin]

Great quote - follow the money, not easy when its been spent

and yet bitcoin back up over €20k .
Oh yeah, I forgot, Bitcoin is 'different'. I for one, no longer have sympathy for ordinary people taking stupid risks in the crypto space.

 

[CuriousGeorge11]

This has nothing to do with Bitcoin.

People foolish enough to lend their crypto in exchange for a yield so Genisis earn could lend it to their parent to trade in defi to try and realise a greater profit than the 7%.

They were longing or shorting crypto in defi on a major trading platform like DYDX on ethereum and Genisis lost is my understanding

 

[tecate]

1) Is a crypto broker the same as a crypto exchange?
2) Who did Genesis lend to other than FTX?
3) Why would they lend crypto? Is it so that the borrower can speculate?
4) Aren't the Winklevoss brothers multi-billionaires? Why don't they just bail out their customers who have lost money?

Genesis didn't interact directly with small investors. It's not an exchange. It's a lending and trading desk. That said, in the case of Gemini, my understanding is that the Gemini Earn product contractually establishes a relationship between the investor and Genesis - not Gemini. Therefore, the Winklevii are not out of pocket here but they are advocating for Gemini customers.

and yet bitcoin back up over €20k .
Oh yeah, I forgot, Bitcoin is 'different'.

The usual approach we see here to conflate everything together. If you're trying to say that a centralised crypto lending product is the same as the world's leading decentralised currency, I'm understating things by a country mile in responding that I don't agree.

 

[tecate]

Genesis now has a restructuring and recovery plan in place - in collaboration with Gemini and other creditors.

LINK