Crypto has gone from a winter to a contagion.
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The announcement comes just days after New York-based Genesis sent a letter 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’s exchange — as reported by The Block.
Genesis also had significant exposure to Singapore crypto hedge fund Three Arrows Capital (3AC) which filed for bankruptcy in the summer and led the crypto market into turmoil in July.
“The past week has been an incredibly challenging and stressful time for our industry,” Gemini officials wrote in a blog post.
The situation is not dissimilar to the ripple effect 3AC’s bankruptcy had on the industry this summer, as the hedge fund’s collapse led to the fall of companies like Celsius Network and Voyager Digital.
FTX’s demise likely will have significantly greater effects.
FTX’s legal problems also mounted, as late Tuesday a proposed class-action lawsuit was filed in Miami alleging FTX’s yield-bearing accounts were unregistered securities.
The suit was first reported by The Block.
The lawsuit seeks unspecified damages from FTX co-founder and CEO Sam Bankman-Fried and nearly a dozen athletes and celebrities who promoted FTX.
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 — telling viewers “Don’t Miss Out on Crypto.”
Help on the way?
“We want the strong industry players today to protect the good industry players who might just be hurt short term,” 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.
Read our coverage of all the FTX-related events and more below:
- Binance Signs Letter Of Intent To Buy FTX.com
- Binance-FTX Deal A No-Go
- Just Like FTX, FTX Ventures Went Big — And Fast — When It Came To Investing
- After The FTX Collapse, This May Be A Good Time For VCs To Start Using ‘Common Sense’ Again
- FTX Collapse Will Reverberate Throughout The VC World For A Long Time
Illustration: Dom Guzman
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