The fallout from the spectacular implosion of crypto giant FTX has set off a far-reaching cascade of effects: it has ensnared a number of celebrities who have endorsed the now bankrupt platform, and the financial contagion is spreads in the vast ecosystem of crypto and digital assets.
On Wednesday, the lending arm of crypto brokerage Genesis suspended redemptions and new lending after an “abnormal” number of withdrawal requests that exceeded its current liquidity, citing market turmoil from the failure of FTX.
Genesis said it was working with advisers “to explore all possible options”, adding that it would release a plan for loan activity next week. “We are working tirelessly to identify the best solutions for the lending industry, including but not limited to finding new liquidity,” the company said.
Genesis’s lending unit had about $2.8 billion in active loans in the third quarter, according to its website.
The suspension comes as the entire crypto industry is on edge following the collapse of Sam Bankman-Fried’s FTX exchange and hedge fund Alameda Research, both of which filed for bankruptcy. at the end of last week.
“In the crypto world, as soon as you see a company or company advertise ‘we’re temporarily halting withdrawals’ — yuck,” said Daniel Roberts, editor of crypto-focused news outlet Decrypt Media. “You’re now putting them on watch… It’s unusual for someone to say ‘we’re stopping withdrawals’ and then they say, ‘OK, withdrawals are back on, all good’.
This “death eve” is not limited to Genesis.
Shortly after the company suspended withdrawals, one of its partners, Gemini – the crypto firm founded by Tyler and Cameron Winklevoss – warned customers that redemptions under its Earn program would be delayed. Gemini said it worked with Genesis to help clients redeem program funds, which allowed clients to earn interest on crypto holdings. No other Gemini products or services were affected, the company said.
Meanwhile, another big player in the crypto space, BlockFi, halted withdrawals last week as FTX took off. On Tuesday, The Wall Street Journal reported that BlockFi is preparing for a potential bankruptcy filing.
Of course, major players in the crypto space are racing to distinguish themselves from FTX and other companies that have gone bankrupt over the past year as token prices have plummeted.
One is Brian Armstrong, the CEO of publicly traded exchange Coinbase, who told CNN’s Julia Chatterly on Wednesday that while the fallout is currently affecting the industry, it could ultimately be positive for companies like his.
“Crypto isn’t going anywhere,” he said in an interview, which airs Thursday on First Move. “One bad player doesn’t jeopardize everything – the same way Bernie Madoff doesn’t cause us to question the whole traditional financial system.”
And the legal headaches for Bankman-Fried, the founder of FTX who stepped down as CEO last week, are mounting.
On Wednesday, an FTX investor sued Bankman-Fried along with several celebrities who endorsed the platform, including Tom Brady, Gisele Bundchen and Steph Curry. “The deceptive FTX platform maintained by the FTX Entities was truly a house of cards,” the proposed class action lawsuit states.
Heavyweight attorneys Adam Moskowitz and David Boies filed suit on behalf of FTX client Edwin Garrison.
Moskowitz, a Florida attorney, is also behind a class action lawsuit against crypto broker Voyager Digital, which also filed for bankruptcy earlier this year. And Boies is perhaps best known for representing Vice President Al Gore in the 2000s. Bush versus Gore.
In an email to CNN Business, Moskowitz alleged that FTX was “a huge Ponzi scheme bigger than the Madoff scheme.”
“FTX were PR and marketing geniuses, and knew that… [it] could only succeed with the help and promotion 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’ request for comment.
In recent days, regulators, policymakers, and even crypto industry executives have publicly called on Congress to act on the crypto market, which is largely unregulated and lacks clear guidelines for traders. .
“The recent failure of a major cryptocurrency exchange and the resulting unfortunate impact on holders and investors of crypto assets demonstrates the need for more effective oversight of the cryptocurrency markets,” Treasury Secretary Janet Yellen said in a statement on Wednesday. “Where existing regulations apply, they must be rigorously enforced so that the same protections and principles apply to crypto assets and services.”
#FTX #Investor #Sues #Tom #Brady #Gisele #Bundchen #Crypto #Contagion #Spreads #CNN #Business