Crypto Contagion Fears Grow as Another Firm’s Finances Tumble

Fears that the collapse of FTX will bring more destruction to the crypto industry are hitting nearly every investor in the United States, from individuals to big Wall Street corporations, with many wondering if another crypto trading platform cryptocurrency called Genesis will fall next.

So far, those fears have not materialized, and a Genesis spokesperson said in a statement to NPR on Tuesday that “our goal is to resolve the current situation in the lending industry without the need for file a report”.

But Genesis has reportedly warned potential investors that it may have to file for bankruptcy if it fails to raise a large sum of money quickly – $1 billion, according to Bloomberg News.

And there are other worrying signs: Gemini has suspended repayments and stopped creating new loans.

“Crypto contagion” is a real possibility in the decentralized system of digital currencies, where there are few investor protections in place. Companies can seemingly refuse to follow standard accounting procedures and controls, and companies can be tangled with each other unclearly.

FTX and its more than 100 subsidiaries around the world had close ties with other companies and served more than one million customers. This made it easy for his financial woes spread rapidly.

BlockFi, one of the few companies bailed out by FTX in recent months, suspended customer withdrawals, citing “significant exposure to FTX and associated legal entities”. He also asked his customers not to make any deposits.

When asked if she was on the verge of bankruptcy, the company’s press team told NPR that “there are a number of scenarios” that she can pursue and that she is working “to determine the best path forward for our clients”.

At the same time, FTX’s collapse was not limited to companies and investors directly exposed to the bankrupt company. The dramatic implosion of the exchange, valued earlier this year at more than $30 billion, has stoked crypto volatility and led the values ​​of cryptocurrencies and bitcoin, which were already in decline, to fall further. more.

It also caused panic.

Investors withdrew more than $400 million from the Gemini exchange, founded by the Winklevoss twins, over a 24-hour period last week spooked when Gemini briefly suspended its Genesis-backed performance-based compensation program, Coindesk reported. .

According to Coindesk, other major exchanges such as Binance and Coinbase have also seen significant declines recently.

Trying to figure out how FTX will affect Genesis

Unlike FTX, which aimed to bring ordinary people into the world of crypto, Genesis works with large institutional investors, those with the most influence in the financial system.

The promise at the top of its website: “Institutional access. Global scale.”

In a series of Twitter posts, Genesis claimed to have “no ongoing lending relationship with FTX or Alameda,” the crypto hedge fund founded by former FTX CEO Sam Bankman-Fried.

But the company reportedly owns FTT, a cryptocurrency created by FTX. Its value fell from an all-time high of $79.53 to under $1.50. And Genesis previously admitted to having $175 million in a locked FTX trading account.

“FTX has created unprecedented market turbulence resulting in abnormal withdrawal requests that have exceeded our current liquidity,” Genesis said recently, adding that it was working on “sourcing new liquidity.”

He has been in contact with two companies, Binance and Apollo Global Management, according to The Wall Street Journal and Bloomberg News. Binance declined to comment on the reports, and Apollo Global Management did not respond to a request for comment.