Brokerage firm Genesis Trading is facing potential solvency issues. A call with creditors is scheduled for tomorrow, during which Genesis could explain the current situation, FTX exposure, and the relationship with Alameda Research. If the rumors are true, the company could dissolve the GBTC and ETHE trusts to repay its lenders. Digital Currency Group (DCG) is the parent company of Genesis and Grayscale.
Are Genesis, Grayscale next in line for FTX contagion?
The collapse of FTX and Alameda Research has fueled the contagion effect, causing several crypto-currency companies to face financial and exit issues, with some considering filing for bankruptcy protection.
We’re hearing semi-credible rumors that Genesis may be having solvency issues. They are having a call with their creditors tomorrow at 8 AM EST to explain the situation. If true, they may possibly be dissolving ETHE and GBTC to pay back their lenders. We will know more tomorrow.
– Autism Capital 🧩 (@AutismCapital) November 16, 2022
According to rumors, Genesis Trading also faces solvency problems. Genesis interim CEO Derar Islim will hold a conference call with clients on November 17 to discuss the state of the crypto-currency markets and Genesis’ lending business. Some believe the company may dissolve GBTC and ETHE to pay back its lenders. The situation will become clearer tomorrow.
In a tweet, Autism Capital says Grayscale controls the GBTC and ETHE trusts, not Genesis. However, Digital Currency Group, the parent company of Genesis and Grayscale, supports Genesis. In addition, a solvency issue could force DCG to dissolve the trusts due to financial problems.
In the transparency filing, Genesis Trading reported having $175 million in escrowed funds in the FTX trading account, but no material exposure to FTX. As a result, DCG provided $140 million in capital injections to Genesis.
Status of GBTC and Grayscale ETHE.
Grayscale’s GBTC suffered a 41% discount in the midst of the FTX crisis. Cathie Wood’s Ark Invest recently purchased $2.8 million worth of shares in Grayscale Bitcoin Trust. According to Coinglass data, GBTC’s total holdings stand at 633.64 BTC worth over $10 billion. At the time of writing, GBTC’s premium is -37.08%.
Meanwhile, ETHE has also hit an all-time high amid the FTX collapse. Currently, it is trading at a premium of -34.47%, according to Coinglass data.