Discounted FTX Crypto offered to Genesis employees, reports Financial Times
The Financial Times today has reported that a number of Genesis employees were offered to invest in FTX cryptocurrencies at a discounted rate.
Prior to its collapse in January, crypto lender Genesis acted as a key source of funding for Alameda Research, the trading firm that belonged to Sam Bankman-Fried. The cryptocurrencies were offered to executives before they were issued to the public. Former employees allege that Bankman-Fried gave the opportunity to invest in presale tokens of FTT and Serum. The presale access to these cryptocurrencies gave Genesis employees a head start to to make a profit once investors bought in.
People familiar with the matter revealed that Genesis executives had low-priced pre-purchase privileges for the cryptocurrency supported by the FTX exchange. FTT and Serum tokens, as well as Solana, were also accepted by Genesis as collateral for the Alameda mortgage to secure its loans.
Genesis’ bankruptcy came as the company is under intense regulatory scrutiny after the US Securities and Exchange Commission (SEC) charged the lenders and exchanges in January. Genesis was also embroiled in a high-profile dispute with Gemini, owned by the Winklevoss twins, over US $900 million in assets that Gemini customers sent to lenders. Genesis’ bankruptcy is the most significant blow to the crypto sector, which is still reeling from the collapse of FTX and the arrest of its founder, Sam Bankman-Fried.
Bankman-Fried, once one of the most famous names in the crypto space, is facing eight charges related to the collapse of his crypto empire, including his lying to investors and siphoning off billions of dollars of customer funds for personal use. To date Bankman-Fried has pleaded not guilty to all charges, insisting that he did not steal any funds.
FTX and Alameda are now under management in bankruptcy but there was no response to a request for comment with regards to cryptocurrencies being offered to Genesis employees at a discount.
Background
In January this year Genesis Global Trading filed for chapter 11 of the US bankruptcy protection code. Genesis was one of the largest crypto lenders but recently faced a problem of liquidity as a result of the collapse of FTX. Genesis is a subsidiary of venture fund Digital Currency Group. It was established as the bitcoin trading division of SecondMarket owned by Barry Silbert. The New York Department of Financial Services issued Genesis with a ´Bitlicense´ and this allowed the company to trade in bitcoin, ethereum, ripple, litecoin and zcash. Singapore-based Three Arrows Capital (3AC) and Alameda Research, a crypto hedge fund and subsidiary company of FTX, owed Genesis Global hundreds of millions of dollars. It is reported that the company began to struggle with liquidity problems prior to the FTX collapse when it failed to acquire funding required of US$1 billion to keep afloat.
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