Key Takeaways
- Genesis has sold collateral, and hedged against further losses after its crypto hedge fund did not meet a June margin call.
- 3AC’s loan amount hasn’t been disclosed
Genesis Trading, a cryptocurrency lender and broker, said Wednesday it was exposed to Three Arrows Capital (3AC), which recently went bankrupt.
Michael Moro stated in a thread on Twitter that Genesis hedge fund had hedged their downside when they failed to meet the margin requirement for June. The CEO said that 3AC’s loan to Genesis had an average weighted margin of more than 80%. However, he did not disclose how much the company loaned.
Moro stated that Digital Currency Group has assumed certain Genesis liabilities relating to 3AC. Moro said that the lender is also pursuing alternative strategies to recover additional losses.
Moro announced that Genesis had mitigated its losses about three weeks ago. “large counterparty” This margin was not met. He did not specify the amount of losses, but said that no funds from clients were affected. It was assumed that the counterparty would be 3AC.
3AC’s bad loan scandal has shaken up the crypto industry. Some lenders revealed large losses which led them to suspend withdrawals from their platforms and stop trading. Voyager, a crypto lender that had given the fund weeks to repay a $657m loan deadline, filed for bankruptcy Wednesday. 3AC, which filed for bankruptcy last week, is most likely unable to fulfill its obligations.
“A lot of the [crypto industry] players are being brought to their knees,” Mark Connors told Blockworks, 3iQ Digital Assets’ head of Research, in an Interview.
The high level of leverage was cited as the main flaw with business models in companies that freeze withdrawals or declare bankruptcy. “People that use leverage, had a plan to be borrowing short and lending long…that asset-liability mismatch is exactly what Lehman did,” He said.
“There are going to be folks that don’t come back. There’ll be a washing-out, there’ll be a consolidation. There’ll be partnering, and there’ll be new players emerging in crypto.”
Genesis has originated more than $44.3 billion worth of loans during the first three months of this year. At the end of quarter, active loans increased by 17% to reach $14.6 billion.
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