More Crypto controversy as Genesis files for bankruptcy
We have not been short of controversy regarding organisations within the Cryptocurrency space. It’s looking like Genesis, a world renowned asset lender, has just filed for bankruptcy.
Genesis are not in a good situation
Once branded “the biggest trading desk for professional investors in cryptocurrency markets.” by Forbes magazine only back in 2021 this statement was short lived it seems. Whilst being a big figure within Web3, it has been reported by US regulators Securities and Exchange Commission (SEC) that the firm were illegally trading Crypto assets to users.
Before the bankruptcy though Genesis were not in a good place regarding their workforce. At the start of January they had to lay off 30% of their staff.
If you have kept up with Financial news, other businesses have had to do the same including META, Coinbase and Twitter to name a few. With the economy technically being in a recession since 2022, this could be an indicator off harsher times to come in the future. However, in Genesis’ case this was a foreshadow of a more imminent fall.
The catalyst for Genesis’ demise can be traced back to last year in 2022. Three Arrows Capital went bankrupt last June as a direct result of the controversy featuring Terra Luna the month prior in May.
They owed Genesis a whopping $1.2 billion as Luna plummeted in dramatic style, despite being backed directly by the U.S dollar.
Genesis is part of a larger corporation known as “Digital Currency Group (DCG)”. Around 200 Web3 related businesses are under DCG making them a big player in the space.
The turmoil does not stop there…
Gemini, the popular Crypto exchange, has been linked to Genesis also. Around $900 million in Crypto assets were deposited by users into Gemini from Genesis.
Gemini Earn is the main service from Gemini in the middle of this as it acts as a savings account for various Cryptocurrency assets. They offer 7.4% interest a great return when compared to traditional banks and their savings accounts.
Withdrawals have been limited since November 2022 and around 340, 000 users have been affected by these events.
Gemini’s founders have tried to rectify the issue at hand by taking to Twitter to inform their users on the appropriate actions they are taking. SEC has accused both Gemini and Genesis of fraudulent behaviour.
What does this tell us?
These recent headlines are not looking good for the Crypto space. We have seen billions in capital be lost from the likes of Genesis. Gemini and FTX. The everyday individual is being heavily affected when exchanges and organisations go under for fraudulent activity.
It is becoming clear that Web3 and the assets within it are needing more regulation. Like we said, too many people are being hard done by and are not retrieving their funds. We saw it with the top NFT token boom last year and the year before where influencers legally got away with conning fans into buying their projects. Projects were turned into rug pulls and those promoting them faced no repercussions.
Whilst Sam Bankman-Fried was the ringleader for FTX, he was the leader in supposedly bringing regulation to the Crypto space giving it law and order. Whether or not he actually was, as time progresses it is becoming more clear that regulation is needed for this space to be taken more serious by outsiders and institutions for further growth and adoption.