There’s no end in sight for Genesis’ prickly problems as executives exhaust avenues to keep the crypto company above water.
Among the 30% of firm-wide employees Genesis cut on Thursday was the majority of its institutional sales team, according to three sources familiar with the matter. The move spells additional trouble, the sources said, for the dwindling prospects of reviving the crypto brokerage’s beset core business lines. An additional two sources detailed those attempts.
A scant five sales staffers remain.
The remaining employees mark a fall from a recent peak of about a dozen business development pros. And that’s not the only fresh Genesis restructuring in the works: The firm has deliberated the viability of spinning out its lending unit, sources said.
Sales employees sticking around include Hanson Birringer, a vice president of institutional sales; Josh Barkhordar, head of sales for the Americas; and an unspecified junior sales analyst.
Leon Marshall, Genesis’ veteran global head of sales, was among those laid off, a source said, Marshall, who joined Genesis at the beginning of 2019, per LinkedIn, orchestrated previous efforts to expand the company’s institutional pipeline of prospective clients. And those initiatives, for a spell, were successful as the company became a dominant force among top crypto credit players before its recent series of unfortunate events.
Sources categorized his departure as a notable blow. Before joining Genesis, Marshall headed research for CryptoCompare. He’s also spent time on the investment side of Wall Street, including a stint as a portfolio manager with Apollo Global — which built out its own crypto capabilities last year. Other senior staffers reporting to Marshall were let go, too.
Sales staffers among first to go
The move reflects a prevalent trend in crypto markets these days as salespeople have far fewer calls to make, a direct consequence of institutional investors pressing pause on voluminous digital asset trades as they wait out the bear market’s turbulence.
A Genesis spokesperson in a statement referred to “unprecedented industry challenges” in detailing the firm’s thinking behind its 30% reduction.
“Genesis has made the difficult decision to reduce our headcount globally,” the spokesperson said. “These measures are part of our ongoing efforts to move our business forward.”
Concentrating on cutting pricey vets is one general and viable mechanism to preserve crucial cash flows. Even so, there was not a top-down focus on parting ways with senior employees, per one source.
The company has also shuttered its wealth management division, The Information first reported. Two sources confirmed the closure to Blockworks.
Marshall did not immediately return a request for comment. A spokesperson for Genesis pointed to the company’s previous statements and declined an additional request for comment. Sources were granted anonymity to discuss sensitive business dealings.
In the cards a lending spinout
Genesis’ top brass, meanwhile, have been weighing the prospects — and the feasibility — of substantially overhauling its lending unit, hatching a blueprint for doing so that would mark a further escalation of its layoffs this week. The firm, to that end, has been engaged in advanced conversations with Moelis & Company regarding the prospects of spinning out its crypto credit arm.
The traditionally TradFi restructuring specialist Moelis is the boutique investment bank Genesis previously tapped to analyze a broader viable financial path forward. CoinDesk first reported the firm’s most recent round of layoffs. In addition to Moelis, Genesis has engaged additional, albeit unspecified, advisers — some coming about at the bequest of its customers.
Genesis’ lending arm has been long considered by the institutional investors and service provider counterparties it does business with as the company’s bread-and-butter in terms of its three main business lines: derivatives and spot cryptoasset trading, lending, and crypto custody.
The trading operation is “fully operational and [is] serving our clients’ trading needs as they always have,” according to Derar Islim, its interim chief executive.
“While we are committed to moving as quickly as possible, this is a very complex process that will take some additional time,” Islim said in a Wednesday statement. “We believe we can arrive at a solution.
Genesis has made “significant progress in refining” the client-facing parts of its business, Islim said — including cutting costs and “driving efficiencies in all our business lines.”
Genesis in the fourth quarter had about $175 million of customer funds frozen in its primary trading account with Sam Bankman-Fried’s defunct FTX, which did “not impact [the firm’s] market-making activities,” the company said at the time.
Does DCG owe Genesis $1B+?
Gemini co-founder Cameron Winklevoss in a public Twitter spat has claimed parent company DCG owes his firm nearly $1.7 billion as a result of an outstanding loan.
DCG CEO Barry Silbert thinks otherwise.
It’s altogether the latest wrinkle for Genesis, which weathered a rough 2022, including halting withdrawals from its lending arm in November, when representatives blamed the “FTX implosion” in explaining the move.
Leading up to the decision to freeze customer assets on its lending platform: exposure to now-bankrupt digital assets-focused hedge fund firm Three Arrows Capital (recently hit with two fresh subpoenas); lingering crypto credit contagion from the downfall of Genesis’ peer digital asset lenders earlier in 2022; and challenges in its custodial business as traders in the fourth quarter rushed to yank their cryptoassets off exchanges.
At the same time, on Nov. 10, the investment firm said its capital and outstanding net positions with FTX were “not material” to its business,” adding that the exchange’s demise had “not impeded the full functioning of our trading franchise.”
Less than a week later, Binance founder “Changpeng “CZ” Zhao was already doing due diligence on potentially acquiring Genesis’ voluminous loan book, which had $2.8 billion of active lines of credit open in the fourth quarter. And other market markers followed suit.
“In the past two days, we printed record volumes, maintained leading market share, and supported clients with their ongoing derivatives needs,” Genesis said in November.
The company “claimed to be OK at the time,” a source said.
Get the day’s top crypto news and insights delivered to your inbox every evening. Subscribe to Blockworks’ free newsletter now.
Interested in working at Blockworks? We’re hiring journalists, a VP of Sales, and engineers! Check our open positions.
Can’t wait? Get our news the fastest way possible. Join us on Telegram.
Source: https://blockworks.co/news/genesis-layoffs-more-bad-news