Former Crypto Lender Genesis Executive Garcia Starts New Venture

Muyao Shen, Bloomberg News

The Genesis logo on a smartphone arranged in the Brooklyn borough of New York, US, on Thursday, Nov. 17, 2022. Reverberations from the collapse of Sam Bankman-Fried’s empire continue to spread through financial markets, threatening the future of crypto lenders like BlockFi Inc. and Voyager Digital Ltd. , Bloomberg

(Bloomberg) -- Martin Garcia, the former managing director and co-head of trading and lending at now bankrupted crypto lender Genesis Global, has joined VersiFi as co-chief executive officer and will lead the digital-asset prime brokerage firm’s expansion into those services.

VersiFi, which also announced that it raised $10 million from Wall Street investment firm Hunting Hill Global Capital, anticipates a rebound in lending activity amid the likely approval in the US of exchange-traded funds that hold Bitcoin directly.

“With the potential ETF looming, I think that creates demand,” said Garcia, 39, in an interview. “And now enough time has gone by and with the market starting to pick up, we are definitely starting to see more of our contacts and potential clients express demand for lending, whether that’s needed for market neutral trading, or hedging, or shorting or plain vanilla trading.”

The collapse of the TerraUSD stablecoin more than a year ago triggered a chain reaction that eventually toppled many well-known crypto firms including exchange FTX and Genesis. The contagion has reshaped the entire industry, according to Sameer Shalaby, co-CEO of VersiFi, who said that a new market structure will replace what existed in the market for the past two years. For crypto lending, the new model will mean collateralized loans, tri-party agreements, stronger technology for risk management and partnerships with third-party custody firms, he said.

“Everything now has to be collateralized,” Shalaby added. “It has to be set up in a way that is safe for both the lenders and the borrowers.”

“The promise and potential of digital assets are still very clear,” said Adam Guren, CEO of Hunting Hill, in a press release. “We’re excited to be working with them and contributing our own expertise to help realize this potential.”

Lending demand has already picked up in places like decentralized finance. Interest rates to borrow stablecoins meant to track the US dollar, such as USDC and Tether, have surged in recent weeks on the largest DeFi lender Aave, which allows peer-to-peer crypto transactions without middlemen, as Bloomberg reported. But an institution-grade lender is still needed for the market, according to Garcia, despite the fact that last year’s multiple blowups in the digital-asset space including Genesis, Garcia’s previous employer, have left a breach of trust in the industry.

“It still looks like people just aren’t fully trusting of everyone and that’s why I think the need for another institutional lender is very much sought after in this space,” Garcia said.

VersiFi, which is founded in New York, is now seeking registrations in the British Virgin Islands. The company is aiming the launch of its lending and trading business in the first quarter of next year, according to Shalaby.

“It definitely feels like the beginning of a new cycle,” Garcia said. “It’s part of the reason why I felt like now was the right time for me to come back into the market after being on the sidelines for a while.”

Garcia left Genesis in August 2021. Before Genesis, he spent more than seven years at SecondMarket, which was founded by Barry Silbert, who runs the venture capital firm Digital Currency Group, which owns Genesis.

(Updates to add comment from Hunting Hill CEO. An earlier version corrected the spelling of Garcia in penultimate paragraph.)