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Crypto broker Genesis cuts 20% of workforce as CEO steps down

Crypto reporter David Hollerith outlines the restructuring happening in crypto broker Genesis, while also looking at the rise in crypto related hacks in 2022.

Video transcript

DAVE BRIGGS: Just this morning, major crypto broker Genesis announced its CEO is stepping down and would cut 20% of its workforce. We've brought in Yahoo Finance's David Hollerith to tell us more about this. David, what are we learning?

DAVID HOLLERITH: Yeah, well, Genesis is a well-known crypto broker. And they provide sort of a range of services. Don't really interface with retail traders that often. They're a subsidiary of the Digital Currency Group, which also owns investment firms like the Grayscale investment Trust. And where the company's layoffs is also sort of tied into this news about the CEO, Michael Morrow, stepping down, who will be replaced by the CEO in an interim, I guess, as they find a replacement.

And sort of the announcement comes a little over a month since a court filing revealed that Genesis went about $2.4 billion to the now bankrupt hedge fund, Three Arrows Capital. Now, given their collateral requirements, we know, according to the filing, that the sum boils down to about a $1.2 billion claim in bankruptcy court. On top of that loss, Genesis also showed last week through their own report that the origination for new loans has declined by about 9% last quarter.

So as part of these changes, Genesis is also expanding its C-suite. They've hired a new chief financial officer, risk officer, and compliance officer, notably. And at the moment, Genesis isn't really offering further comments on the details. So what we can learn from this or sort of glean from all of it is that it is sort of a continual shakeup from what we saw in Q2 happen to crypto.

SEANA SMITH: And David, there's also an alarming trend, something that we have talked about here on Yahoo Finance. The number of hacks that we're seeing play out in the crypto space, they have certainly skyrocketed as of late. What should we make of this year's trend, just in terms of crypto crime and what this means for investor confidence in the space?

DAVID HOLLERITH: Yeah, so losses for crypto hacks year to date have totaled to $2 billion. And that's a 37% increase from last year, according to data from blockchain analytics firm Chainalysis. And we see two patterns that have sort of come from the hacks that have happened this year, and the first being that more than a billion dollars of that total has been stolen from crypto bridge projects. Crypto bridge projects, they're basically blockchain versions of correspondent banks that allow users to send crypto assets across blockchains. And the security is pretty difficult to figure out.

Now, the second trend we've seen with hacks is that state sponsored hackers affiliated with North Korea have been behind an estimated billion dollars of the total that's been lost. So, on the flip side, though, we are also seeing that scam revenue has fallen. So investors are falling for less scams. It's about a 65% drop, which sort of shows that things have kind of gone off a cliff from there.

But at least one reason why we can sort of see-- put these two patterns together and sort of make out what's happening is that scams, for example, are heavily influenced by market dynamics, and hacking much less so. In other words, we can sort of think of this as from the crime side as a little bit of consolidation, where there are these more sophisticated players that are, more or less, unaffected by what they're doing, whereas sort of the petty criminals have left the market, so to speak.

One last thing I'll point out is just that there are a number of high profile bankruptcies that are happening right now. And fraud has sort of been thrown around. And no fraud has been proven in any of those cases. But if something were to happen, that would drastically swing the numbers for the first half of 2022 as far as crypto crime goes.

SEANA SMITH: All right, David Hollerith, thanks so much for breaking that down for us.