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The spectacular implosion of cryptocurrency giant FTX has had a wide-ranging set of repercussions: It attracted many celebrities who backed the now-bankrupt platform, and the financial crisis is spreading to the vast ecosystem of cryptocurrencies and digital assets.
On Wednesday, the lending arm of cryptocurrency brokerage Genesis suspended redemptions and new loan originations after an “abnormal” number of withdrawal requests exceeded its current liquidity, citing market turmoil caused by the FTX failure.
Genesis said it was working with advisers to “explore all possible options”, adding that it would publish a business plan for lending next week. “We are working tirelessly to find the best solution for our lending business, which includes finding new liquidity,” the company said.
Genesis’ lending segment had about $2.8 billion in active loans in the third quarter, according to its website.
The entire crypto industry is on edge following the unraveling of Sam Bankman-Fried’s FTX exchange and the Alameda Research hedge fund, both of which filed for bankruptcy late last week, halting trading as a result.
“In the cryptocurrency world, the moment you see a company or company say ‘we’re temporarily stopping withdrawals’ — oops,” said Daniel Roberts, editor-in-chief of Decrypt Media, a cryptocurrency-focused news outlet. “You’ve got them in a state of death right now…someone says ‘we’re stopping withdrawals’ and then they say, ‘well, withdrawals are back, we’re fine.’ That’s unusual.”
“Deathwatch” isn’t limited to Genesis.
Shortly after the company suspended withdrawals, one of its partners, Gemini, the cryptocurrency firm founded by Tyler and Cameron Winklevoss, warned customers that redemptions under its Earn program would be delayed.Gemini says it is working Partnering with Genesis to help clients redeem funds from the program, enabling clients to earn interest on their cryptocurrency holdings. No other Gemini products or services were affected, the company said.
Meanwhile, BlockFi, another big player in the crypto space, halted withdrawals last week as FTX went unglued. On Tuesday, the Wall Street Journal reported that BlockFi was preparing to file for bankruptcy protection.
Of course, the major players in the crypto space are rushing to differentiate themselves from FTX and other firms that have seen their token prices plummet over the past year.
One of them is Brian Armstrong, chief executive of listed exchange Coinbase, who told CNN’s Julia Chatley on Wednesday that while the fallout is hurting the industry now, it could end up hurting companies like his. favorable.
“Crypto is not going anywhere,” he said in an interview that will air Thursday on First Move. “One bad player isn’t going to ruin the whole thing — just like Bernie Madoff isn’t going to make us question the entire traditional financial system.”
Legal troubles are piling up for FTX founder Bankman-Fried, who stepped down as CEO last week.
On Wednesday, an FTX investor sued Bankman-Fried and several celebrities who backed the platform, including Tom Brady, Gisele Bundchen and Stephen Curry. “The deceptive FTX platform maintained by the FTX entity is truly a house of cards,” the proposed class action states.
Heavyweight attorneys Adam Moskowitz and David Boies filed the lawsuit on behalf of FTX client Edwin Garrison.
Moskowitz, a Florida attorney, is behind a class-action lawsuit against cryptocurrency brokerage Voyager Digital, which also filed for Chapter 11 bankruptcy earlier this year.Boyce is probably best known for representing Vice President Al Gore in the 2000s bush v clot.
In an email to CNN Business, Moskowitz claimed that FTX was “a bigger Ponzi scheme than the Madoff scheme.”
“FTX is a public relations and marketing genius and knows… [it] It can only be successful with the help and promotion of some of the world’s most famous, respected and loved celebrities and influencers,” Moskowitz wrote.
Representatives for Brady, Bundchen and Curry did not immediately respond to CNN Business’ requests for comment.
In recent days, regulators, policymakers, and even crypto industry leaders have publicly called on Congress to take action against the crypto market, which is largely unregulated and lacks clear guidelines for traders.
“The recent failure of a major cryptocurrency exchange and its unfortunate impact on crypto asset holders and investors demonstrates the need for more effective oversight of the cryptocurrency market,” Treasury Secretary Janet Yellen said in a statement Wednesday. “Where existing regulations apply, they must be strictly enforced so that the same protections and principles apply to cryptoassets and services.”