Crypto bank Genesis halts withdrawals, citing fallout from FTX failure

By Allison Morrow, CNN BusinessUpdated: Wed, 16 Nov 2022 15:26:12 GMTSource: CNN BusinessThe lending arm of crypto brokerage Genesis Global Trading suspended redemptions and new loan originations afte

By Allison Morrow, CNN Business

Updated: Wed, 16 Nov 2022 15:26:12 GMT

Source: CNN Business

The lending arm of crypto brokerage Genesis Global Trading suspended redemptions and new loan originations after an "abnormal" number of withdrawal requests that exceeded its current liquidity, citing market turmoil from 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 the lending business next week. "We're working tirelessly to identify the best solutions for the lending business, including among other things, sourcing 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 unraveling of Sam Bankman-Fried's FTX exchange and Alameda Research hedge fund, both of which filed for bankruptcy late last week.

"This morning is a more alarming crypto news day than FTX bankruptcy day last Friday," tweeted Daniel Roberts, editor-in-chief of Decrypt Media, on Wednesday.

The speedy and spectacular implosion of FTX, once one of the industry's biggest players, 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 set off the global financial crisis.

On Tuesday, the Wall Street Journal reported that crypto lender BlockFi, which halted withdrawals last week over its exposure to FTX, was preparing for a potential bankruptcy filing.

Meanwhile the legal headaches for Bankman-Fried, FTX's founder who resigned 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. The investors are being represented by Adam Moskowitz, with David Boies serving as co-counsel.

In an email to CNN Business, Moskowitz alleged FTX was "a massive Ponzi scheme larger than the Madoff scheme."

"FTX were geniuses at public relations and marketing, and knew that ... [it] could only be successful with the help and promotion of the most famous, respected, and beloved celebrities and influencers in the world," Moskowitz wrote.