Genesis Global Capital, a global cryptocurrency lending company, is being investigated by U.S securities authorities as part of a broad investigation into the connections between crypto companies, as reported by Barron’s on November 25th.
Several states, including Alabama, according to the director of the state’s securities commission, Joseph Borg, are looking into whether Genesis and other companies persuaded citizens to invest in securities related to cryptocurrencies without registering them properly.
Additionally, Borg said, “the new queries are in response to the fallout from the bankruptcy of FTX and subsequent disruptions at other firms.”
However, the director refuses to disclose the other companies. Whereas Genesis is silent at the moment. On November 16th, Genesis announced a suspension of client withdrawals due to the collapse of the exchange FTX and irregular withdrawal demands.
After reports of bankruptcy protection surfaced and with the hiring of an investment bank, Barron’s report highlighted DCG CEO Barry Silbert’s claim that the Genesis loan book had a liquidity and duration mismatch in a letter to investors this week.
According to the letter, Genesis has hired consultants and is looking into all available possibilities. The CEO also announced that Genesis would emerge stronger despite the current state of affairs than before.
Investigation Of Genesis & Others Following FTX Collapse
Institutions make up Genesis’s customer base, but this doesn’t mean that retail investors aren’t affected by it too. Like, when the company announced a suspension of withdrawal transactions, Genesis’s partner Gemini Trust also said it would stop accepting withdrawals from accounts that allowed retail investors to earn interest from crypto deposits.
Borg asserts that retail customers will be impacted if an institution-serving company collapses. He continued by saying that compared to the financial crisis of 2008–2009, the interdependencies and interlocking links he has seen in the crypto realm appear to be more complicated.
The report also claims that Since more than a year ago, cryptocurrency businesses have been the target of investigations and enforcement proceedings by securities authorities in Alabama, Texas, New Jersey, and a number of other jurisdictions because they are allegedly selling securities to citizens without the required authorizations.
According to the report’s statement:
The subjects of the investigations have included bankrupt crypto lenders Celsius Network and Voyager Digital VYGVQ +9.80% , as well as BlockFi, which in February agreed to pay $100 million to the states and the Securities and Exchange Commission as part of a settlement.
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