Bessie Liu

<div id="highlights-block_62fcffc4a62e1" class="highlights">
 <ul>
 <li>Chief Operating Officer Derar Islim will be interim CEO</li>
 <li>Moro will remain with Genesis as an adviser until transition is complete</li>
 </ul>
 
</div>



Michael Moro is <a href="https://www.businesswire.com/news/home/20220816005936/en/Genesis-Announces-New-Leadership-Team" target="_blank" rel="noreferrer noopener">stepping down</a> as CEO of Genesis as part of a leadership reshuffle at the cryptocurrency brokerage.



Derar Islim, the current chief operating officer of Genesis, will take over Moro’s position in the interim as the search to find a permanent replacement begins. Moro will remain with Genesis as an advisor until the transition is complete.



In addition, Tom Conheeney, who was previously the president of SAC Capital, will also become a senior advisory consultant to Genesis. He will join Islim on the company’s board of directors.



“The changes and investments we’re announcing today affirm our commitment to operational excellence as we continue to expand our services to meet the needs of our clients today and into the future,” Islim said in a <a href="https://www.businesswire.com/news/home/20220816005936/en/Genesis-Announces-New-Leadership-Team" target="_blank" rel="noreferrer noopener">statement</a>.



The crypto brokerage also <a href="https://www.bloomberg.com/news/articles/2022-08-17/genesis-ceo-steps-down-as-crypto-broker-slashes-its-workforce?srnd=premium#xj4y7vzkg" target="_blank" rel="noreferrer noopener">revealed to Bloomberg</a> that it is cutting 20% of its 260-person workforce.



Loans from Genesis’ lending desk have <a href="https://cms.blockworks.co/genesis-active-loans-dropped-66-in-q2/" target="_blank" rel="noreferrer noopener">declined by 9%</a> from its previous quarter, and active loans outstanding dropped by 66% from the prior period.



Genesis was once closely tied with Singapore-based <a href="https://cms.blockworks.co/tag/three-arrows-capital/" target="_blank" rel="noreferrer noopener">Three Arrows Capital</a> (3AC) and suffered major losses after the cryptocurrency hedge fund collapsed earlier this year.



As one of the largest digital asset lenders and a facet of crypto conglomerate Digital Currency Group (DCG), the brokerage was able to receive support from its parent company after it filed a $1.2 billion claim against 3AC, with DCG assuming the entire claim.



“We thank Michael for his steadfast leadership of Genesis in building the company into the industry leader it is today,” Mark Murphy, chief operating officer of Digital Currency, <a href="https://www.businesswire.com/news/home/20220816005936/en/Genesis-Announces-New-Leadership-Team" target="_blank" rel="noreferrer noopener">said in a statement</a>.&nbsp;



“We’re pleased to elevate Derar to the interim CEO role — he has our full trust and confidence and has been instrumental in developing key areas of the Genesis business,” Murphy said.



This is a developing story.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Leadership Reshuffle at Genesis Includes CEO Michael Moro

Shalini Nagarajan

<div id="highlights-block_62c68864537fb" class="highlights">
 <ul>
 <li>Genesis said it sold collateral and hedged further downside after the crypto hedge fund failed to meet a margin call in June</li>
 <li>The amount loaned to 3AC has not been made public</li>
 </ul>
 
</div>



Cryptocurrency lender and broker Genesis Trading said on Wednesday that it had exposure to recently bankrupt Three Arrows Capital (3AC).&nbsp;



In a <a href="https://twitter.com/michaelmoro/status/1544733041045786626?s=20&amp;t=chXU3p_iNgXZkGhsyrG1EA" target="_blank" rel="noreferrer noopener">Twitter thread</a>, CEO Michael Moro said Genesis sold collateral and hedged its downside once the crypto hedge fund failed to meet a margin call in June. He added that the firm’s loans to 3AC had a weighted average margin requirement of over 80%, but didn’t disclose the loaned amount.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/ The loans to this counterparty had a weighted average margin requirement of over 80%. Once they were unable to meet the margin call requirements, we immediately sold collateral and hedged our downside.&mdash; Michael Moro (@michaelmoro) <a href="https://twitter.com/michaelmoro/status/1544733041045786626?ref_src=twsrc%5Etfw">July 6, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The lender’s parent company, Digital Currency Group, has now assumed some of Genesis’ liabilities related to 3AC, Moro said. It is pursuing other strategies to recover any extra losses, he added.



The announcement comes about three weeks after Moro <a href="https://twitter.com/michaelmoro/status/1537822423806009344" target="_blank" rel="noreferrer noopener">said</a> Genesis mitigated losses with a “large counterparty” that failed to meet a margin call. He didn’t mention what figure the losses amounted to, but declared no client funds were impacted. The counterparty was widely assumed to be 3AC.



3AC’s bad loans have shaken the cryptocurrency industry, with some lenders revealing extensive losses that forced them to halt withdrawals and trading on their platforms. Crypto lender Voyager <a href="https://cms.blockworks.co/voyager-files-for-bankruptcy-days-after-freezing-withdrawals/" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> on Wednesday, weeks after giving the fund a deadline to fulfill a $657 million loan repayment. Because 3AC last week <a href="https://cms.blockworks.co/3ac-files-for-bankruptcy-as-co-founders-location-unknown/" target="_blank" rel="noreferrer noopener">filed</a> for bankruptcy itself, it’s most likely not in a position to meet obligations. 



“A lot of the [crypto industry] players are being brought to their knees,” Mark Connors, 3iQ Digital Asset’s head of research, told Blockworks in an interview.&nbsp;



He pointed to a high degree of leverage as a business model flaw in the companies freezing withdrawals or filing for bankruptcy. “People that use leverage, had a plan to be borrowing short and lending long…that asset-liability mismatch is exactly what Lehman did,” he said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“There are going to be folks that don&#8217;t come back. There&#8217;ll be a washing-out, there&#8217;ll be a consolidation. There&#8217;ll be partnering, and there&#8217;ll be new players emerging in crypto.”</blockquote>



Genesis originated over $44.3 billion in loans in the first quarter this year, according to a company <a href="https://genesistrading.com/about/quarterly-reports/" target="_blank" rel="noreferrer noopener">report</a>. Active loans rose 17% to $14.6 billion at the end of the quarter.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Michael Moro

Newsletter

Blockworks Research