FTX panic spreads to other crypto platforms
The fallout from the rapid collapse of the FTX cryptocurrency exchange could result in more companies in the industry facing severe liquidity issues. Gemini, owned by the Winklevoss brothers, is suffering a rush on withdrawals.
According to data from blockchain analytics platform Nansen, in the past seven days, Gemini has registered $682 million in net outflows, with $485 million withdrawn in the last 24 hours of the survey.
The company, which was founded by Cameron and Tyler Winklevoss, has been trying to calm crypto investors, announcing on Wednesday that it would halt withdrawals on its Earn accounts that provide interest. Its lending partner for the Earn accounts is Genesis, one of oldest and most well-known crypto brokers.
“We are aware that Genesis Global Capital … has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days,” Gemini said, adding that they are working to help customers redeem their funds from the Earn program “as quickly as possible.”
Crypto exchange Genesis confirmed on Wednesday that it has stopped customer withdrawals and issuance of new loans as a result of investor panic.
On November 9, two days before FTX filed for bankruptcy, Cameron Winklevoss issued a thinly veiled criticism of FTX, tweeting: “We do not do anything with your funds unless explicitly authorized and directed to do so by you. Regulatory oversight is important as it ensures that companies like Gemini do what they say they do.”
Once a major brokerage for trading crypto, FTX has revealed it could have as many as 1 million investors seeking to recoup their losses. The Bahamas-based brokerage has billions in liabilities.
The insolvency of FTX, which filed for Chapter 11 bankruptcy protection on November 11, was the result of a liquidity shortfall when clients attempted to withdraw funds from the platform a few days ago. According to Reuters, citing sources, the shortfall appears to have been the result of FTX founder Sam Bankman-Fried transferring $10 billion of customer funds from the platform to his cryptocurrency trading firm, Alameda Research.
Regulators are currently looking into whether Bankman-Fried and his associates misused customer funds.
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