This is an audio transcript of the FT News Briefing podcast episode: ‘Crypto broker Genesis halts withdrawals’

Sonja Hutson
Good morning from the Financial Times. Today is Thursday, November 17th, and this is your FT News Briefing.

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The UK chancellor unveils a high stakes economic plan today. A leading crypto company has halted withdrawals after the FTX collapse. And Iraq is reeling from a corruption scandal that’s being called the “heist of the century”.

Raya Jalabi
Typically, how corruption takes place in Iraq is that its contracts taken from ministries and given off to their cronies or companies that they take a cut from. But this was brazen.

Sonja Hutson
I’m Sonja Hutson, in for Marc Filippino, and here’s the news you need to start your day.

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UK chancellor Jeremy Hunt will unveil a massive package of tax hikes and spending cuts today. Hunt’s plan, known as the Autumn Statement, lays out measures to tackle inflation and repair public finances. Life will get harder for millions of Brits. The chancellor will claim the pain is necessary to curb soaring prices and restore faith in Britain. Hunt’s plan is also aimed at repairing the country’s economic reputation. His predecessor’s budget proposal and its controversial tax cuts were met with such backlash it led to then prime minister Liz Truss stepping down.

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A leading cryptocurrency broker suspended withdrawals at its lending unit yesterday. Genesis Trading cited unprecedented market turmoil sparked by the collapse of FTX. It also cited abnormal withdrawal requests as the reason for its move. Genesis plays a key role in crypto markets, as the FT’s Nikou Asgari explains.

Nikou Asgari
So this is only related to Genesis Trading unit at the moment. And the way that it works is that Genesis lets its clients lend out their coins, whether that’s bitcoin or other tokens, in exchange for yields of as much as 10 per cent. And it’s this lending arm that has been hit by the withdrawals as people see what’s happened to FTX and see that they’ve had the funds stuck and they can’t redeem now that FTX has gone bankrupt, they’re rushing to pull out the coins from almost any exchange or crypto financial services company. And Genesis clearly can’t manage that.

Sonja Hutson
Nikou, will this move by Genesis have repercussions of its own?

Nikou Asgari
It just adds another layer of worries to people who are invested in crypto, working in crypto as they see what happened to FTX, which as I said was one of the biggest exchanges in the world and the most prominent collapsing. And now the ripple effects are touching Genesis. And as a result of Genesis suspending these withdrawals, it’s also hit other companies, for example, Cameron and Tyler Winklevoss, the Winklevoss twins, which many listeners might remember from back in Facebook days and the issues they had with Zuckerberg. But they now run this huge crypto platform called Gemini, which works with Genesis and has a lending product with Genesis, and they’ve had problems with that now. So it’s just the level of partnerships in the industry and the issues arising from FTX are just rippling all the way across.

Sonja Hutson
So do we have a sense of what happens next with Genesis?

Nikou Asgari
Well, Genesis last week said it had $175mn stock on FTX. And its parent company, which is run by billionaire Barry Silbert, it gave a cash injection of $140mn. And this is the second time that the parent group DCG has stepped in. After over the summer, Genesis was hit really hard by the fall and the collapse of Three Arrows Capital, a Singapore based crypto hedge fund. And it’s just unsure how many more times that Barry Silbert and DCG are going to step in to rescue Genesis. It leaves them in a very precarious position, I think.

Sonja Hutson
That’s the FT’s digital markets correspondent, Nikou Asgari.

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In Iraq, corruption is endemic. But a scandal that erupted last month involving more than $2bn stolen from the country’s tax authority has Iraqis outraged. They’ve dubbed it “the heist of the century”. The FT’s Middle East correspondent Raya Jalabi has been covering this and she joins me now. Hi, Raya.

Raya Jalabi
Hi.

Sonja Hutson
So if I have this right, about $2.5bn was withdrawn from a state-run bank where companies kept money that was meant to be used to pay their taxes. Do we know who did this and how they took so much money?

Raya Jalabi
Well, that’s the big question, isn’t it? Essentially what we know is that the scandal erupted when the Ministry of Finance revealed the outcome of an internal investigation last month. So they found that from September 2021 to August 2022, about 250 cheques were written out to five companies. Some of them were recently registered right before the scheme started to take place. And so what these companies were doing, the companies in question who are doing this fraud scheme, they’re essentially going into the banks and withdrawing these cash in these cheques that they claimed were on behalf of these larger firms. And those five companies, the directors, have been hauled in for questioning. Aza . . . I mean, some sources that I spoke to for this story said that there’s a list of up to 40 people who are suspects in this, and one of the central suspects is named as an owner of one of these companies. The reason he’s sort of being looked at very carefully is because he’s said to have a lot of relationships with very powerful politicians, which is why this scandal is sort of roiling the hallways of power, as we say.

Sonja Hutson
Raya, what’s the public’s reaction to all this?

Raya Jalabi
It’s caused an absolute firestorm. I mean, people are used to talking about Iraq and corruption and to its detriment. I mean, you know, corruption in Iraq is endemic and it’s a result of the last almost 20 years of sort of post-Saddam governance. And people are angry. They’re frustrated that once again, there’s a massive corruption scandal involving their political leaders. There’s a hashtag that’s been going around social media called #theheistofthecentury. People have been absolutely apoplectic. And it’s because it speaks to a greater malaise that Iraqis have with their governing elites. And in 2019, thousands upon thousands of young people took to the streets in Baghdad, and many of them were killed and they were protesting against corruption, and they were protesting against what they were calling manipulation of the political elite. And this is yet another example of, you know, that political leaders are letting them down.

Sonja Hutson
So how is the government handling this?

Raya Jalabi
It’s a difficult one. But the new premier, Mohammed Shia al-Sudani, he took office about a week after the scandal erupted. And he’s sort of been vehemently anti-corruption in all of his public rhetoric since then. He’s been sort of purging acolytes of the previous premier who he and his entourage accused of corruption. And he’s been pushing for an investigation. But bear in mind, every single one of his predecessors has said the same thing. So there’s not a lot of faith that he’s going to be able to do anything about it. And in particular, powerful people who are his backers in parliament are largely implicated in the scandal. So he will struggle to hold to account senior members of Iraq’s political establishment. One analyst I spoke to, who is based in Baghdad, was saying that, you know, it implicates so many high-level players, including ministers and ex-ministers, civil servants, et cetera, that it’s a political issue at this point. And we’ll see how far he is going to be able to go.

Sonja Hutson
Aside from just the sheer scale of this scandal, is there anything else that makes it different from past corruption scandals in Iraq?

Raya Jalabi
I mean, I’ve been studying Iraq’s political economy for a long time, and I’ve been sort of amazed at all the different scams and fraud schemes that people have undertaken throughout the years. But what I found so fascinating is that this is the first time in recent memory that I’ve seen all of, you know, sort of members of competing political factions in Iraq, all colluding essentially for financial gain. So you had competing factions who this summer fought bloody street battles against each other because they were vying for dominance and vying for power to be able to form the new government. And yet the leaders on both sides to be alleged, are alleged to be involved in this scandal. So as someone I was talking to said, it’s not that, you know, it’s that corruption in Iraq is the political system.

Sonja Hutson
Raya Jalabi is the FT’s Middle East correspondent. Thanks, Raya.

Raya Jalabi
Thank you.

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Sonja Hutson
Before we go, we’re going to test your crossword skills. All right. Here we go. What do you call an embarrassed sailor boy coming aboard scruffy? If you think you know the answer, you can check out the full puzzle in our new FT crossword app. That clue was from yesterday, but there are new puzzles every day. There’s also an archive of the most recent 30 puzzles. We’ve got a link to download the app in our show notes.

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You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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