Nov 16 (Reuters) – Cryptocurrency lender Genesis Global Capital on Wednesday stopped refunding customers citing the sudden failure of cryptocurrency exchange FTX, while FTX founder Sam Bankman-Fried faces a lawsuit, court documents showed.
FTX filed for US bankruptcy protection on Friday after traders pulled $6 billion from the platform in three days and rival exchange Binance backed out of a bailout deal. After multiple tweets and interviews from Bankman-Fried, FTX said it had “no ongoing role” at the company and was not speaking on its behalf.
FTX’s implosion sent ripples through the industry, disrupting the liquidity of firms that were once one of the world’s largest cryptocurrency exchanges and prompting investigations by regulators in several countries.
Lawmakers from the US Congress said on Wednesday that they plan to hold hearings on the FTX before the end of the year, while the New York Department of Financial Services is monitoring the situation at Genesis.
Treasury Secretary Janet Yellen said on Wednesday that more effective oversight of cryptocurrency markets is needed to address risks “at the heart of the cryptocurrency market turmoil seen last week” and urged Congress, although she did not directly name the FTX. act quickly.
Digital Currency Group, the venture capital firm that is the primary parent of Genesis as well as cryptocurrency manager Grayscale, said on Twitter that Genesis’ decision to stop payments was “in response to extreme market dislocation and a loss of industry confidence.” FTX explosion.”
Genesis, which also offers cryptocurrency trading and custody services through an unaffected affiliate, had only $2.8 billion in active loans at the end of the third quarter, according to the company’s website.
Genesis’ suspension “has no impact on the business operations of DCG and our other wholly-owned subsidiaries,” the company said.
Still, the world’s largest bitcoin fund, Grayscale Bitcoin Trust ( GBTC.PK ), fell almost 7% on Wednesday, while bitcoin fell 2.6% to $16,400, down nearly 20% this month.
Crypto exchange Gemini, founded by the Winklevoss twins, said its profit-making “Win” program, which uses Genesis as a lending partner, could not secure customer returns.
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 the consequences of FTX’s collapse.
Crypto lender BlockFi, which previously admitted it had significant exposure to FTX, plans to lay off employees as it prepares to file for bankruptcy, the Wall Street Journal reported Tuesday.
Meanwhile, US court documents showed that Bankman-Fried faced legal action in the US from investors who claimed the company’s profit-making crypto accounts violated Florida law.
The proposed class action lawsuit, filed in Miami on Tuesday, alleges that the FTX income accounts are unregistered securities illegally traded 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.
The US and Bahamian governments discussed the possibility of bringing Bankman-Fried to the US for questioning, Bloomberg reported on Tuesday.
But Bahamas Police Commissioner Clayton Fernander said Wednesday on the sidelines of a police meeting in Nassau that police had not interviewed or met with Bankman-Fried and that Fernander had not been in contact with U.S. authorities. issue.
The liquidation of the FTX group is proving contentious as the exchange’s Bahamas-based liquidators filed a Chapter 15 filing in a US bankruptcy court in New York on Tuesday, challenging the validity of the US bankruptcy proceedings.
The liquidators, appointed by a Bahamas judge on November 10, said that because their filing came before FTX filed for bankruptcy in the United States, they were the only ones authorized to open bankruptcy proceedings for FTX and its affiliates.
Many FTX group companies with more than 100,000 and possibly more than 1 million creditors are involved in US bankruptcy proceedings.
Elsewhere, cryptocurrency exchange Binance said it did not contribute to the collapse of FTX in response to hearings on the crypto industry by a British parliamentary committee.
When FTX’s problems emerged last week, Binance first said FTX would sell its FTT token, then signed a non-binding letter of intent to buy FTX’s non-US assets before backing out of the deal.
The US House Financial Services Committee said Wednesday it plans to hold a hearing in December to investigate the FTX bankruptcy.
Reporting by Alun John and Elizabeth Howcroft in London, Hannah Lang and Chris Prentice in Washington, John McCrank and Dietrich Knauth in New York, Jasper Ward and Mehnaz Yasmin in the Bahamas, Bangalore; Edited by Lananh Nguyen, Jane Merriman, and Matthew Lewis
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