Genesis Halts Withdrawals As FTX-Induced 'Crypto Contagion' Spreads

Crypto has gone from a winter to a contagion.

Crypto lender said Wednesday it is suspending withdrawals and new loans after the dramatic collapse of crypto exchange .听

鈥淭his decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion,鈥� Genesis鈥� parent company said on .

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The announcement comes just days after New York-based Genesis sent a to its clients letting them know it was able to secure an equity infusion of $140 million from Digital Currency Group. Genesis said it had about $175 million of assets locked away on FTX鈥檚 exchange 鈥� as reported by .

Genesis also had significant exposure to Singapore crypto hedge fund (3AC) which filed for bankruptcy in the summer and led the crypto market into turmoil in July.听

The news started a domino effect, as also on Wednesday following Genesis鈥� announcement and 鈥� said it would halt redemptions. Genesis was a partner.

鈥淭he past week has been an incredibly challenging and stressful time for our industry,鈥� Gemini officials wrote in a.

The situation is not dissimilar to the ripple effect 3AC鈥檚 bankruptcy had on the industry this summer, as the hedge fund鈥檚 collapse led to the fall of companies like and .

FTX鈥檚 demise likely will have significantly greater effects.

Lawsuit filed

FTX鈥檚 legal problems also mounted, as late Tuesday a proposed class-action lawsuit was filed in Miami alleging FTX鈥檚 yield-bearing accounts were unregistered securities.

The suit was first reported by .

The lawsuit seeks unspecified damages from FTX co-founder and CEO and nearly a dozen athletes and celebrities who promoted FTX.

Those named include quarterback , Brazilian model , tennis player , basketball star , and the .

FTX went big on advertising this year, using big-name entertainers to push its exchange. The company even aired an ad during the 2022 Super Bowl 鈥� telling viewers “Don鈥檛 Miss Out on Crypto.”

Help on the way?

In an effort to stop the destruction being caused by FTX鈥檚 fall, CEO told he would be establishing a recovery fund to help people in the industry.

鈥淲e want the strong industry players today to protect the good industry players who might just be hurt short term,鈥� said Zhao, who did not specify an exact figure for the recovery fund.

Zhao also said in the interview he did not expect recent events to cause long-term damage.

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