Crypto lender Genesis owes US-based crypto exchange Gemini customers $900 million, according to a December 3 Financial Times report.
The report revealed that Gemini had formed a creditor committee to determine whether it would recover the funds from Genesis.
Genesis is a significant partner in Gemini’s Earn program. This program allowed retail investors to lend their crypto assets for an 8% interest.
How Genesis Got Into its Liquidity Crunch
Genesis is a subsidiary of Digital Currency Group (DCG) -a crypto conglomerate that includes Grayscale and Coindesk.
Due to the FTX implosion, Genesis was unable to meet redemption requests. This forced the crypto lender to halt withdrawals for its customers.
DCG published an investor letter that shows it owes $2 billion -most of the debt is to Genesis. Grayscale, its sister company, has faced increased fear from the crypto community as they speculate how this could affect the investment firm and its major product, Grayscale Bitcoin Trust (GBTC).
Reports revealed that Genesis and DCG tried to raise funds and have hired investment banking firm Moelis & Co to help explore options.
Gemini Launches Center to Rebuild Trust
Gemini has launched a Trust Center to rebuild trust in the crypto exchange.
According to a November 29 tweet, the Trust Center is a metrics dashboard for the funds it holds on its platform.
Gemini said its Trust Center included information on its licenses and registrations, corporate governance information, etc. The firm also stated that all its customer funds are held at a 1:1 and available for withdrawal anytime.
Also, Gemini claims it holds its users’ cryptocurrencies in accounts that are segregated from its assets. It added that it does not do anything with users’ assets unless they explicitly authorize such usage.
Meanwhile, BeInCrypto reported that CryptoQuant founder Ki Young Ju said the exchange experienced a surge in Ethereum withdrawals on November 16.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.