Another week, another crypto bankruptcy.
This time it’s Genesis, the Barry Silbert-owned lender that lent hundreds of millions of dollars to FTX-affiliate Alameda Research.
But Genesis’ demise is more than just a tale of the contagion brought on by the FTX scandal. It also spells the end of an era for crypto’s pseudo banks.
It is the latest major firm in the space that tried and failed to bring the centuries-old banking business model to digital assets. Genesis and its peers made money by taking crypto deposits for a promised rate of interest, lending the funds to other firms for a higher rate of interest and pocketing the difference.
To be fair, it lasted longer than Celsius and Voyager, which both filed for Chapter 11 bankruptcy in July, or BlockFi, which followed suit in November.
They all came unstuck, it seems, because of poor risk management. Crypto lenders were highly reliant on a few big players who they hoped would keep paying big returns, such as Alameda and collapsed crypto hedge fund Three Arrows Capital.
“They’re all interconnected,”…
