Crypto lending firm Genesis Trading is reportedly facing potential losses in the hundreds of millions. The losses are partly related to the over-leveraged Three Arrows Capital and crypto lender Babel Finance.
The collapse of Three Arrows Capital sent shockwaves across the crypto lending industry. Now, numerous firms are facing substantial losses from their exposure to the crypto hedge fund.
Currently, the precise tally of Genesis' losses is still unknown as it is seeking at least partial repayment from its counterparties. The firm aims to offset some of the losses by hedging. Amid such uncertainty, Genesis is reportedly pulling credit lines from counterparties left and right.
Genesis CEO Michael Moro issued the following statement:
"As we already stated on June 17, we mitigated our losses with a large counterparty who failed to meet a margin call to us. We sold collateral, hedged our downside and moved on. Our business continues to operate normally and we are meeting all of our clients' needs."
Previously, Genesis acknowledged taking a hit in the crypto downturn without revealing any numbers. Moro tweeted in mid-June that Genesis "carefully and thoughtfully mitigated" its "losses with a large counterparty who failed to meet a margin call."
In the first quarter of 2022, Genesis reported over $44.3 billion in loans. Its parent company DCG is a large crypto conglomerate rumored to have a $1 billion treasury. According to a person familiar with the matter, DCG will likely help Genesis "buffer that kind of shock."
In recent days, other embattled crypto lenders have enlisted deep-pocketed saviors. For instance, Sam Bankman-Fried's FTX and Almeda Research have made opportunistic investments in BlockFi and Voyager.
After declaring 3AC's default on loans worth around $670 million, crypto broker Voyager was forced to freeze withdrawals. Others like BlockFi are believed to be facing similar challenges.
Meanwhile, the forced deleveraging across markets has further tanked Bitcoin's price in recent days. The leading cryptocurrency is currently trading hands for $19,200.