Fears of crypto contagion are growing as another company's finances wobble

Fears that the collapse of FTX will lead to more destruction in the crypto industry are hitting almost every investor in the United States, from individuals to major Wall Street firms, with many wondering if another cryptocurrency trading platform called Genesis will fall next.

So far, those fears have not been realized, and a Genesis spokesman said in a statement to NPR on Tuesday that "our goal is to resolve the current situation in the lending business without the need for any bankruptcy filing."

But Genesis has reportedly warned potential investors that it may need to file for bankruptcy if it fails to quickly raise a significant chunk of cash - $1 billion, according to Bloomberg News.

And there are other worrying signs: Gemini has suspended redemptions and stopped originating new loans.

"Crypto contagion" is a real possibility in the decentralized system of digital currencies, where there are few investor protections in place. Firms seemingly can opt out of following standard accounting procedures and controls, and companies can be tangled up with one another in unclear ways.

FTX and its 100-plus affiliates around the world had deep ties with other companies, and served more than 1 million customers. That made it easy for its financial troubles to spread quickly.

BlockFi, one of a handful of companies FTX bailed out in recent months, has paused client withdrawals, citing "significant exposure to FTX and associated corporate entities." It asked its customers not to make any deposits, as well.

When asked if it is on the verge of bankruptcy, the company's press team told NPR that "there are a number of scenarios" it can pursue and it is working "to determine the best path forward for our clients."

At the same time, the collapse of FTX hasn't been limited to companies and investors with direct exposure to the bankrupt business. The spectacular implosion of the exchange, valued earlier this year at more than $30 billion, has stoked volatility in crypto and led the values of cryptocurrencies and bitcoin, which were already dropping, to fall even more.

It's also sparked panic.

Investors pulled more than $400 million out of the Gemini exchange, founded by the Winklevoss twins, in a 24-hour period last week, spooked when Gemini briefly suspended its yield-paying program that was backed by Genesis, Coindesk reported.

Other big exchanges such as Binance and Coinbase have seen sizable drawdowns recently, as well, according to Coindesk.

Trying to figure out how FTX will affect Genesis

Unlike FTX, which focused on bringing everyday people into the crypto world, Genesis works with large institutional investors, the type that have more influence on the financial system.

The promise at the top of its website: "Institutional access. Global scale."

In a series of posts on Twitter, Genesis claimed to have "no ongoing lending relationship with FTX or Alameda," the crypto hedge fund founded by now-former FTX CEO Sam Bankman-Fried.

But the company reportedly does own FTT, a cryptocurrency created by FTX. Its value has fallen from an all-time high of $79.53 to less than $1.50. And Genesis acknowledged, previously, it has $175 million in in a locked FTX trading account.

"FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity," Genesis said recently, adding it is working on "sourcing new liquidity."

It has been in touch with two firms, Binance and Apollo Global Management, according to The Wall Street Journal and Bloomberg News. Binance declined to comment on the reports and Apollo Global Management did not respond to a request for comment.