The recent collapses of FTX and Alameda, the crypto hedge fund owned by SBF, have had significant repercussions for the cryptocurrency industry, with companies such as Genesis and Silvergate being hit hard.
Yesterday, Genesis, a lender of high-risk loans, announced that it would be laying off 30% of its staff, around 60 roles. This news comes after interim CEO Derar Islam informed clients that fixing the company's issues is "a very complex process that will take some additional time." The collapse of FTX, a major client of Genesis, has put the company in a precarious position, with the company freezing redemptions and warning that it may also file for bankruptcy if it is unable to raise additional funds.
In addition to the layoffs at Genesis, Silvergate Capital also announced significant cuts yesterday, eliminating 200 jobs, approximately 40% of its workforce. The company cited "the economic realities facing the digital asset industry today" in a filing with the Securities and Exchange Commission.
Shares of Silvergate were down 43% at market close after the company revealed that it had to sell assets at a loss of $718 million to cover around $8.1 billion in withdrawals following the collapse of FTX.
The ongoing crisis at Genesis and the layoffs at Silvergate serve as a reminder of the volatile nature of the cryptocurrency industry and the importance of caution when investing in these assets.
It is worth noting that the collapses of FTX and Alameda are not the only challenges facing these companies. In August of last year, Genesis, which is owned by Barry Silbert's Digital Currency Group, had already downsized by 20% due to its exposure to the failed crypto hedge fund Three Arrows Capital.
The struggles of Genesis and Silvergate also highlight the importance of regulatory oversight in the cryptocurrency industry. On January 3rd, a joint statement from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency warned that "issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices." It is crucial that companies operating in the cryptocurrency space are held to the same standards as traditional financial institutions in order to protect consumers and ensure the stability of the industry as a whole.