Crypto broker Genesis suspends redemptions; Bankman-Fried, celebrities sued

Published: Updated:
Enable Read mode
100% Font Size

Crypto broker Genesis Global Capital is suspending redemptions and new loan originations at its lending business, it said on Wednesday, in the latest sign of the industry fallout from last week’s collapse of major crypto exchange FTX.

For the latest headlines, follow our Google News channel online or via the app.

FTX filed for bankruptcy protection on Friday in one of the highest-profile crypto blowups after traders pulled $6 billion from the platform in three days.

“We have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business. We are working diligently to shore up the necessary liquidity to meet our lending client obligations,” a Genesis spokesperson said in a statement.

Genesis’ parent Digital Currency Group, an investor which also owns crypto asset manager Grayscale, said on Twitter that the decision to suspend redemptions “was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion”.

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

Grayscale said in a series of tweets that Genesis Global Capital is not a counterparty or service provider for any Grayscale product and that “Grayscale products continue to operate business as usual.”

“Grayscale does not borrow, lend, rehypothecate, or otherwise encumber the products’ underlying assets, and the custodian for the assets is prohibited from engaging in such activity,” it said.

Last week, Genesis said that its derivatives business had approximately $175 million in locked funds on FTX.

Joseph Edwards, investment partner at Securitize Capital said: “This shouldn’t be seen as a step up, but rather as a step outwards, given that Genesis have a number of significant regulated counterparties - there will be discomfort being felt among OTC desks in Europe and North America in particular.”

FTX fallout

Genesis is not the only company to be affected by FTX’s collapse, which has caused turmoil across the crypto industry, with many asset managers and trading firms exposed in some way to the exchange.

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.

US court filings showed Sam Bankman-Fried, FTX’s founder, is being sued in a US class action by 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 US.

The lawsuit also seeks damages from a number of celebrities who allegedly helped to 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 on Wednesday.

Bitcoin the world’s largest cryptocurrency was last down 2.6 percent at $16,400. It has fallen around 20 percent this month so far.

Read more:

FTX collapse reminds us how seductive get rich quick schemes are

Crypto exchange FTX bankruptcy filings in, French central bank wants quick regulation

Bahamas authorities scrutinize FTX collapse

Top Content Trending