Genesis Trading Confirms 3AC Exposure, Assures Customers of Stability

Jimmy Aki
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Genesis Trading, a lending and institutional trading company, has become the latest crypto company to confirm financial exposure to the embattled Three Arrows Capital (3AC) hedge fund.

The company confirmed its liabilities earlier today, assuring users that it would be able to lean on its parent company and financial acumen to weather the storm.

3AC Losses Hurt, But It’s All Good

In a Twitter thread shared earlier today, Michael Moro, the chief executive CEO of Genesis Trading, confirmed that the company had suffered some losses as a result of the insolvency of the Singapore-based Three Arrows Capital. The CEO explained that while they initially hoped to keep 3AC’s name out of their official communications, Three Arrows Capital filing for bankruptcy protection means they can name them for transparency reasons.

In his thread, Moro pointed out that Genesis Trading had loaned some money to 3AC, and the loan had a weighted average margin requirement of over 80%. When the news of 3AC’s insolvency came out and the company was unable to meet margin calls, Genesis immediately sold some of their collateral to cover their position and hedge.

While Genesis Trading had hoped 3AC would be able to fulfil its obligations, the reality of the market has left them with no choice but to rely on their parent company – the Digital Currency Group. Moro confirmed that the parent company had assumed some of Genesis Trading’s liabilities, ensuring that they will have enough capital to keep operating in the long term.

Moro ended his thread by confirming that Genesis is in a good financial position. He added that the company is adept and risk-hedged enough to navigate the current market environment.

The Market Contagion Continues

While Moro didn’t reveal the extent of their exposure to 3AC, industry news reports suggest that the company may have lost up to hundreds of millions of dollars. However, the losses aren’t due to 3AC alone. It would appear that the company also lost some funds due to its exposure to Babel Finance, a crypto lender that also has money tied up with 3AC. Babel has gone under, and it is reportedly hiring U.S. investment banking firm Houlihan Lokey to help with financial restructuring.

Genesis is not the only firm to be exposed to 3AC and its recent losses. Voyager Digital, a crypto brokerage service, was one of the first companies to confirm its exposure to the embattled hedge fund, with 3AC unable to repay a loan of 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) to Voyager.

Voyager had tried to put up a brave face amid the market condition, and it even got a lifeline from Alameda Research – the quantitative trading firm founded by crypto billionaire and FTX CEO Sam Bankman-Fried.

Last month, Alameda loaned $500 million to Voyager with the hopes of helping the company to stay afloat. Sadly, none of that was enough to stop what was coming. Earlier this week, Voyager filed for Chapter 11 bankruptcy protection with the US Bankruptcy Court for the Southern District of New York.

BlockFi, one of the crypto market’s biggest lenders, also confirmed exposure to 3AC. A leaked investor call from hedge fund Morgan Creek Digital confirmed that the liquidation of an unnamed client by BlockFi last month was indeed 3AC. During the call, Morgan Creek’s partners stated that BlockFi had reported a loan worth over $1 billion, with 30% overcollateralisation to 3AC.

Anthony “Pomp” Pompliano, Morgan Creek’s founder, added that about two-thirds of the $1.33 billion collateralisation was in Bitcoin. Once 3AC was unable to meet its obligations, the Bitcoin was liquidated.

BlockFi eventually got a $400 million lifeline from FTX. The exchange also opted to buy BlockFi for $240 million based on its performance down the line.

If history is anything to watch, Genesis isn’t in the clear. However, the trading firm’s ability to rely on its parent company may be its saving grace.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.