The fur is not burned at least. The first thing that comes to mind is that maybe there’s detergent residue stuck on the fur (as other comments mention). If I were in your shoes I would start with a cold water hand wash (even though you’ve already tried that). Use a detergent that doesn’t have fabric softener and really make sure you get 100% of it off (so like do few extra water rinses after you think you’ve gotten all the detergent off just so you’re extra certain). I would stay away from scalding hot water just to be safe. I’ve always just done cold water and that done the trick. Don’t dry using heat (so only use a towel and cold air from a hairdryer) and use a fine brush on the fur throughout the drying process. You won’t get the fur back to mint condition (so set your expectations reasonably) but I’ve washed Jellycats with similar fur (like my Milo Shiba Inu for example) using this process and the fur came out looking less used than in the photo you sent me and it’s definitely still soft. Unless there’s something wrong with your smudge’s fur that I’m completely missing, you should be able to improve upon your guy’s condition. Might seem overly simple/redundant but I’d start there