Winklevoss Brothers-Led Gemini Unable To Meet Customer Redemptions As Its Lending Platform Halts Withdrawals

Tyler and Cameron Winklevoss-led cryptocurrency platform Gemini on Wednesday said it will not be able to meet customer redemptions for the next five days after its lending partner Genesis Global Capital paused withdrawals.

“The past week has been an incredibly challenging and stressful time for our industry. We are disappointed that the Earn program SLA will not be met, but we are encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfill their obligations to customers under the Earn program,” the company stated on its official blog post.

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The company added that its other products and services are unaffected and it is a full-reserve exchange and custodian, according to an email it sent to customers on Monday. It also claimed in the email that it has "no exposure to FTT tokens or Alameda and no material exposure to FTX."

Genesis Global Trading has temporarily stopped accepting redemptions and initiating new loans. Interim CEO Derar Islim confirmed the decision to customers on a Wednesday call.

According to the company's website, the division known as Genesis Global Capital caters to institutional clients.

It had $2.8 billion in total active loans at the end of the third quarter of 2022.

Meanwhile, the Gemini Dollar loan rates on the decentralized finance (DeFi) lending protocol Aave jumped as high as 73%, following the announcement. 

These rates could rise above 50% for one of two possible causes.

Either traders are trying to short the asset, or there is a possibility that liquidity is leaving the pool and converted into an alternate asset.

Supply and demand govern rates on platforms like this — when supply declines or demand increases, the rate to lend out the asset concerned will increase to entice holders to deposit their money.

The lending rate reached a staggering 73% at its highest point today as at least one of these circumstances materialized.

Although the supply of GUSD on Aave had increased from 10 million to 15 million at the time of writing, the rate had already fallen back to 2%.

Shares of Grayscale Bitcoin Trust GBTC meanwhile saw a decline on Wednesday following Genesis Global Capital's announcement to suspend redemptions and new loan originations at its lending business.

Grayscale and Genesis are both owned by the same parent company, Digital Currency Group.

The Bitcoin BTC/USD trust was designed to give investors a way to gain exposure to bitcoin in the form of security while "avoiding the challenges of buying, storing, and safekeeping BTC." 

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Photo: Primakov via Shutterstock