More cryptocurrency companies are coming under liquidity pressures, as the fallout from the FTX exchange’s collapse begins to spread. Presently Gemini, the exchange founded by the Winklevoss twins, is experiencing a rush on withdrawals.
Blockchain analytics platform Nansen has released data showing that over the previous seven days, there have been $682 million in net outflows from Gemini, with $485 million of that withdrawn over the last 24 hours of the analysis.
Founded by Cameron and Tyler Winklevoss, Gemini has been trying to assuage investor fears. It announced Wednesday it was putting a halt on all withdrawals from its Earn accounts, which provide interest. It had partnered with Genesis, one of the oldest, and most trusted crypto-brokers on the offering.
Gemini issued a statement saying, “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.” The company added it would try to help customers complete withdrawals from the Earn program “as quickly as possible.”
Genesis meanwhile issued a statement acknowledging it has stopped customer withdrawals, as well as issuance of new loans, as a result of investor panic.
Two days prior to FTX’s bankruptcy filing, Cameron Winklevoss had tweeted a criticism of FTX, saying, “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.”
Since its collapse, FTX has admitted it may have as many as 1 million investors who are now affected by its shortfall. The brokerage, based in the Bahamas, has billions in liabilities.
The problems at FTX began when the head of a rival brokerage announced he was selling all of his FTT tokens, used by FTX in transactions. The statement provoked a tsunami of withdrawals from panicked customers, and FTX rapidly encountered a liquidity shortfall estimated by the founder to be about $8 billion in size.
Although the rival cryptocurrency firm whose founder triggered the crisis, Binance, initially offered to buy FTX out, due diligence revealed possible mishandling of customer funds, as well as potential future regulatory investigations, and Binance quickly backed out.
A report by Reuters alleged the shortfall arose due to the company founder, Sam Bankman-Fried, taking roughly $10 billion of investor funds in FTX, and transferring it to his cryptocurrency trading firm Alameda Research, in large part to payoff bank loans which were called due.
Investigations into the circumstances of the FTX collapse are ongoing, as the founder, Bankman-Fried, has reportedly been detained by Bahamian authorities.
