The lending arm of crypto brokerage Genesis Global Trading suspended redemptions and new loans after an “abnormal” number of withdrawal requests that exceeded its current liquidity, citing market turmoil due to the failure of rival 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.
“This morning is a more alarming crypto news day than the day FTX went bankrupt last Friday,” tweeted Daniel Robertseditor of Decrypt Media, Wednesday.
The rapid and dramatic implosion of FTX, once one of the biggest players in the industry, is raising concerns about contagion within the crypto ecosystem. Some observers have described FTX’s collapse as the “Lehman moment” for crypto, referring to the 2008 implosion of Wall Street titan Lehman Brothers, which sparked the global financial crisis.
On Tuesday, The Wall Street Journal reported that crypto lender BlockFi, which halted withdrawals last week due to its exposure to FTX, was bracing for a potential bankruptcy filing.
Meanwhile, the legal headaches of Bankman-Fried, the founder of FTX who stepped down as CEO last week, are piling up. On Wednesday, a group of FTX investors filed a lawsuit against Bankman-Fried as well as several celebrities who have 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. Investors are represented by Adam Moskowitz, with David Boies as co-counsel.
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.