Multiple US regulators are examining crypto trading firm Genesis Global Capital for possible violation of securities laws. According to media reports, Alabama Securities Commission Director Joseph Borg indicated that his agency along with other state agencies is on the trail.
They are looking into allegations that Genesis and other companies persuaded residents of their states to invest in crypto securities without any proper registration. However, Borg did not reveal the names of companies under the scanner. Genesis has not reacted to the reports.
Genesis had earlier stated that it hired an investment bank to explore possible options to overcome the liquidity crisis that stemmed from its exposure to bankrupt crypto exchange FTX. Although Genesis has not filed for bankruptcy protection yet, the option is still on its table.
Genesis is struggling to recover from its exposure to collapsed crypto exchange FTX and failed crypto hedge fund Three Arrows Capital.
Genesis spent much of November scrambling to raise funds or reach a deal with creditors. Although Binance had evinced interest in taking over its loan book, it backed out. The company’s institutional lending unit later halted withdrawals and new loan originations.
According to Genesis sources, its derivatives unit had $175 million in locked funds of FTX. Digital Currency Group (DCG), its parent, supported Genesis’ balance sheet with an equity infusion of $140 million, but the fund crunch persists.
Genesis used to be described as the Goldman Sachs of crypto.
In the boom time, the business model brought big gains for Genesis. In 2021 alone, Genesis issued $131 billion in loans and set up $116.5 billion in trades. To back up these loans, Genesis would borrow from individuals and institutions that own large quantities of coins known as whales. The chief revenue was a good cut of profits in return.
