New York CNN Business –
The fallout from the spectacular implosion of crypto giant FTX has unleashed a cascade of far-reaching effects: it has caught a list of celebrities who endorsed the now-bankrupt platform, and the financial contagion is spreading to other companies in through the great digital and cryptographic asset. ecosystem
On Wednesday, the lending arm of crypto brokerage Genesis suspended repayments and new loan origination after an “abnormal” number of withdrawal requests exceeded its current liquidity, citing market turbulence for the failure of FTX.
Genesis said it was working with advisers “to explore all possible options”, adding that it would release a plan for the lending business next week. “We are working tirelessly to identify the best solutions for the lending business, including, among other things, obtaining new liquidity,” the company said.
Genesis’ 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, which filed for bankruptcy late last week.
“In the crypto world, the moment you see a company or company announce ‘we’re temporarily halting withdrawals,’ yes,” said Daniel Roberts, editor-in-chief of Decrypt Media, a crypto-focused news outlet. “Now you put them on death watch. … It’s unusual for someone to say ‘we’re stopping withdrawals’ and then say, ‘OK, we’re doing withdrawals again, we’re fine.'”
This “death watch” is not limited to Genesis.
Shortly after the company suspended withdrawals, one of its partners, Gemini, the crypto company founded by Tyler and Cameron Winklevoss, warned customers that refunds from its Earn program would be delayed. Gemini said it was working with Genesis to help clients redeem funds from the program, 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 when FTX went off the rails. On Tuesday, the Wall Street Journal reported that BlockFi was preparing for a possible bankruptcy filing.
And the legal headaches for Bankman-Fried, the FTX founder who stepped down as CEO last week, are piling up.
On Wednesday, an FTX investor sued Bankman-Fried as well as several celebrities who have backed the platform, including Tom Brady, Gisele Bundchen and Steph Curry. “The deceptive FTX platform maintained by the FTX Entities was really a house of cards,” the proposed class action claims.
Heavyweight attorneys Adam Moskowitz and David Boies filed the suit on behalf of an 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 year 2000 Bush v. Gore.
In an email to CNN Business, Moskowitz alleged that FTX was “a massive Ponzi scheme bigger than the Madoff scheme.”
“FTX were PR and marketing geniuses, and I knew that… [it] 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.