Gemini and Kraken cut spending- The Cryptonomist

The crypto winter resulting from the chain of bankruptcies in 2022 has prompted the Gemini exchange to cut its staff by 10 percent, more cuts will also be made by the Kraken platform. 

Gemini and Kraken are coming to terms with the damage the crypto world has suffered, the fear that welds grips investors to tighten the mesh of liquidity and exchanges, and so the companies are running for cover.

The crypto exchange Gemini

Gemini, founded by the Winklevoss brothers, the same brothers from the $65 million lawsuit against Facebook back in the day, is one of the very few exchanges that is subject to New York state banking laws.

Due to the damage caused by FTX’s bankruptcy, fear and the recent failure of Genesis, the platform has joined a sizeable group of companies that has chosen to undertake a spending review starting with its main cost item, personnel. 

Gemini boasted 1,300 employees as of June last year but from there on began a series of cuts in various tranches until this latest one. 

10% of staff were cut in June 2022, another 7% the following month, and another 100 people lost their jobs in November.

The company is not the only one to incur staff cuts, Coinbase, Crypto.com, Genesis and Kraken had also implemented cuts on 11 November which is when SBF declared bankruptcy. 

“We had hoped to avoid further reductions after this summer, however, persistent negative macroeconomic conditions and unprecedented fraud perpetuated by bad actors in our industry have left us with no choice but to revise our outlook and reduce headcount further,”

Cameron Winklevoss wrote in a company letter.

With this latest wave of cuts, the third in eight months, the company of Cameron and Tyler Winklevoss should have finished the internal cost rationalization operation at Gemini. 

Winklevoss and Silbert at loggerheads 

There have been several deals between Winklevoss and Silbert; the two financial giants have been longtime bricks-and-mortars and were already accumulating Bitcoin when it was worth as little as a pizza. 

Now the relationship between the entrepreneurs is crumbling because of, as is always the case, “God Money.”

With its Earn product, Gemini gave those who invested in the instrument the possibility of 8% returns on deposits made. 

The extraordinary but still not the best result in the crypto sector, which in some cases touched for the same product a return of 20% was obtained through Genesis. 

Genesis in essence was borrowing money from Gemini and through a tight trading team was also able due to the good period for the crypto compartment to give out returns.  

With the various black swans, namely Three Arrows Capital, Terra-Luna and especially Sam Bankman-Fried’s FTX, the problems came as timely as the contagion brought by the failures just mentioned. 

Cryptocurrencies went down, and of course Gemini went into liquidity crisis as Genesis was unable to continue its role as an accelerator nor was it able to repay the amounts lent by Gemini itself. 

Genesis did not allow new loans and was quick to halt operations to its users. 

“FTX created unprecedented market turmoil resulting in abnormal withdrawal requests that exceeded our current liquidity.”

For Winklevoss, the causes should be blamed squarely on Silbert, the tycoon is allegedly guilty of failing to return the $900 million deposited by Gemini users and turned over to the company causing both Gemini and Genesis itself to stall. 

Genesis in turn had incurred an additional debt of more than $1 billion from 3AC at the time the latter had its own financial problems. 

Silbert intervened by making a $1.1 billion loan between the two companies he was part of (Genesis and CDG). 

According to Gemini, Genesis was not clear about the internal loan and instead of making the company’s foundation stronger it may have only served to extend its life to the detriment of Gemini’s own investors. 

The suspicion is that it was a simple:

“10-year promissory note and was a complete gimmick that did nothing to improve Genesis’ immediate cash position or make its balance sheet solvent.”

In addition, the Securities and Exchange Commission (SEC) believes that crypto companies Gemini and Genesis were offering unregistered securities and not tokens, in essence a photocopy case of the one the regulator filed against Ripple Labs. 

The Kraken crypto exchange

The marine monster platform closes its doors in Japan.

One of the largest exchange platforms (third last year) based in America, it will return the investment it made with its presence in the Asian state. 

From February this year, Kraken will leave its Japan offices due to the conditions of the Japanese market and in general the crypto world, implementing a policy of spending review as already initiated by other companies in the sector.

The company has chosen to leave 30% of employees at home and to halt registration with the Financial Services Agency (FSA) as of 31 January. 

The stop will coincide with the return of investments made by Japanese users in crypto on the platform. 

The exchange has calmed concerns about solvency by reassuring that the company’s coffers are covered and investments will be repaid. 

Kraken had announced the mass layoffs affecting 30% of employees as early as a month ago, explaining how it was a necessary wound to free itself from the market squeeze and avoid bankruptcy. 

Jesse Powell, CEO of the company confirmed the layoff of more than 1,000 employees.

In any case, Powell remains optimistic about the crypto sector and calm that the company he heads will be rescued from the stormy seas in which the industry has ended up.