Connect with us

Hi, what are you looking for?

Right Decision NowRight Decision Now

World News

FTX fallout hits crypto lender Genesis; Bankman-Fried, celebs sued

Major crypto player Genesis Global Capital suspended customer redemptions in its lending business on Wednesday, citing the sudden failure of crypto exchange FTX, while court papers showed FTX founder Sam Bankman-Fried faces legal action.

FTX filed for bankruptcy protection in the United States on Friday in the highest-profile crypto blowup to date, after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal. After a flurry of tweets and interviews by Bankman-Fried, FTX said he “has no ongoing role” at the company and does not speak on its behalf.

The implosion of FTX has rippled across the industry, hobbling liquidity at firms with exposure to what was once one of the world’s biggest crypto exchanges, and prompting investigations by regulators in several countries.

Lawmakers from the US Congress said on Wednesday they were planning hearings on FTX before yearend, while the New York Department of Financial Services said it is monitoring the situation at Genesis.

While not naming FTX directly, Treasury Secretary Janet Yellen said on Wednesday that more effective oversight is needed over the crypto markets to address risks previously identified that were “at the center of the crypto market stresses observed over the past week,” and urged Congress to act quickly.

Venture capital firm Digital Currency Group, the ultimate parent of Genesis, as well as of crypto asset manager Grayscale, said on Twitter that Genesis’ decision to suspend redemptions “was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion.”

Genesis, which also offers crypto trading and custody services through an affiliate that are not affected, had $2.8 billion in total active loans at the end of the third quarter, according to the company’s website. Last year, it extended $130.6 billion in crypto loans and traded $116.5 billion in assets, it said.

The suspension at Genesis “has no impact on the business operations of DCG and our other wholly owned subsidiaries,” the company said.

Still, Grayscale Bitcoin Trust GBTC.PK, the world’s largest bitcoin fund, plunged almost 7% on Wednesday, while the price of bitcoin fell 2.6% to $16,400 and is down around 20% this month.

Crypto exchange Gemini, which was founded by the Winklevoss twins, said its yield-generating “Earn” program, which uses Genesis as its lending partner, will not be able to meet customer redemptions.

Several other crypto firms, including Crypto.com and stablecoin Tether, said on Wednesday they had no exposure to Genesis.

Genesis is not alone in facing fallout from FTX’s collapse.

Crypto lender BlockFi, which previously acknowledged it has significant exposure to FTX, plans to lay off workers while preparing to file for bankruptcy, the Wall Street Journal reported on Tuesday.

Within the industry, some executives considered possible further ripple effects.

“I do think there’s going to be another washout of crypto, but it’s going to be the less well-capitalized crypto players who got burned by not having diversification of their assets,” said Jeff Howard, head of institutional sales at Hong Kong-based digital exchange OSL.

“The crypto ecosystem is intertwined in a way that will drive further contagion in the near term. Crypto contagion risk remains on the rise,” added Joe Urban, managing director of electronic trading at prime brokerage firm Clear Street.

LEGAL ACTION
Meanwhile, US court filings showed Bankman-Fried is facing legal action in the United States from investors alleging the company’s yield-bearing crypto accounts violated Florida law.

The proposed class action filed late on Tuesday in Miami alleges that FTX yield-bearing accounts were unregistered securities that were unlawfully sold in the United States.

The lawsuit also seeks damages from several celebrities who helped promote FTX, including National Football League quarterback Tom Brady and tennis star Naomi Osaka.

Representatives for Bankman-Fried, Brady and Osaka did not immediately respond to requests for comment.

US and Bahamian authorities were discussing the possibility of bringing Bankman-Fried to the United States for questioning, Bloomberg reported on Tuesday.

But Clayton Fernander, the Commissioner of Police in the Bahamas, said on Wednesday on the sidelines of a police conclave in Nassau that police have not interviewed or met with Bankman-Fried and that Fernander has not been in communication with US authorities in relation to the matter.

LIQUIDATOR SPAT
FTX group’s liquidation is proving a subject of dispute, as the exchange’s Bahamas-based liquidators filed a Chapter 15 petition in a US bankruptcy court in New York late on Tuesday questioning the validity of the US bankruptcy proceedings.

The liquidators, appointed by a Bahamas judge on Nov. 10, said that because their filing came before FTX’s bankruptcy filing in the United States, they were the only ones authorized to begin bankruptcy proceedings for FTX and its affiliates.

The US bankruptcy proceedings involve multiple FTX group companies with more than 100,000, and possibly over 1 million, creditors. — Reuters

    You May Also Like

    Business

    The head of the International Monetary Fund has warned of increased risks to the stability of the financial system after weeks of banking sector...

    World News

    BEIJING — China landed an uncrewed spacecraft on the far side of the moon on Sunday, overcoming a key hurdle in its landmark mission...

    World News

    LONDON — Talks aimed at reaching a global agreement on how to better fight pandemics will be concluded by 2025 or earlier if possible,...

    World News

    SINGAPORE — Ukrainian President Volodmyr Zelensky’s unscheduled appearance at Asia’s biggest security conference dominated proceedings on Sunday after China’s defense chief slammed “separatists” in...

    Disclaimer: rightdecisionnow.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 rightdecisionnow.com | All Rights Reserved