More signs of trouble have surfaced at the Winklevoss twins’ embattled cryptocurrency exchange Gemini after FTX’s sudden collapse into bankruptcy sparked fears of a sector-wide contagion.
CoinDesk reported on Wednesday that Gemini had experienced a $563 million rush in customer outflows in the last 24 hours, compared to just $78 million in inflows. The net outflow was the largest among any cryptocurrency platform.
Gemini — whose founders Cameron and Tyler Winklevoss have become crypto kingpins in the years since their legal war over Facebook with former Harvard classmate Mark Zuckerberg — also was reportedly forced to temporarily halt withdrawals on its “Gemini Earn” program where customers can earn interest on their digital currency.
The move raised questions about the health of a program that holds more than $700 million in customer money, according to Bloomberg. Genesis has reportedly tapped advisers to help find a remedy for the situation. The Earn accounts were frozen after its main lending partner, Genesis Global Capital, enacted a similar freeze, according to the report.
In a lengthy statement, Gemini said it was aware that Genesis had paused withdrawals and “will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days.”
“The past week has been an incredibly challenging and stressful time for our industry,” Gemini said. “We are disappointed that the Earn program SLA will not be met, but we are encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfill their obligations to customers under the Earn program.”
Company officials added that the pause “does not impact any other Gemini products and services.”
Meanwhile, Gemini’s exchange went offline for a time on Wednesday — an outage the company attributed to an issue with Amazon Web Services.
“Gemini exchange fully back online; all customer funds held on the Gemini exchange are held 1:1 and available for withdrawal at any time,” Gemini said in a tweet.
The Post has reached out to Gemini for further comment on the situation.
Genesis’ lending unit was forced to pause redemptions and new loan originations on Wednesday – a move the firm attributed to volatility caused by FTX’s collapse.
“FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity,” Genesis said in a Twitter thread.
Gemini’s move only added to mounting fear among cryptocurrency investors that FTX’s downfall will topple the entire sector, resulting in massive volatility and losses.
The latest crunch added to the pain at Gemini, which laid off 10% of its staffers in June as the Winklevoss twins admitted that cryptocurrencies were in a “contraction phase.”
FTX filed for Chapter 11 bankruptcy last week after a sudden liquidity crunch that left the platform unable to meet its obligations. At least $1 billion in client funds are still missing, according to Reuters.
Another platform, BlockFi, is preparing for a potential bankruptcy filing and has halted customer withdrawals, the Wall Street Journal reported. The company admitted to having “significant exposure” to FTX and its sister cryptocurrency trading firm Alameda research, which also declared bankruptcy.