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Genesis, DCG's crypto exchange, owes creditors more than $3 billion

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Crypto exchange Genesis owes creditors more than $3 billion, prompting its owner, Digital Currency Group, to explore selling off assets across its large portfolio of ventures to raise money, according to people familiar with the matter.

DCG, a conglomerate that owns crypto media outlet CoinDesk and investment manager Grayscale, is trying to raise new money after its Genesis unit was crippled in November by the FTX collapse.

As part of its efforts, DCG is considering divesting some of its venture capital holdings, which include 200 cryptocurrency-related projects such as exchanges, banks and custodians in at least 35 countries and are worth around $500 million. , according to people familiar with the matter. care.

Genesis’ debts to creditors, the scale of which has not previously been reported, underscore the magnitude of the fundraising task for the Connecticut-based DCG, whose quest for external funding has not attracted interest as the group struggles after the cryptocurrency meltdown. . exchange FTX. The group is also embroiled in a high-profile dispute with the Winklevoss twins, whose cryptocurrency exchange Gemini used Genesis in its lending program.

Genesis, a wholly owned subsidiary of DCG, was one of the biggest lenders in the crypto market, allowing customers to borrow their coins in exchange for high yields. However, it halted customer withdrawals in November following the FTX implosion, blaming “unprecedented market turmoil”.

Genesis owes creditors more than $3 billion, two of the people said. DCG declined to comment. Genesis did not respond to requests for comment.

Genesis has hired investment bank Moelis to help explore its options, but talks for outside funding have so far failed to materialize. DCG chief executive Barry Silbert told shareholders on Tuesday that the group has cut 30% of the workforce at Genesis and recently closed its wealth management business in an effort to reduce costs.

Genesis’ debts include $900 million to Gemini customers, €280 million to Dutch exchange Bitvavo and also cash to customers of crypto economy firm Donut. A separate group of Genesis creditors is being represented by lawyers for Proskauer Rose, according to people familiar with the matter.

DCG manages one of the largest portfolios of crypto ventures, backing a variety of crypto exchanges including Coinbase, Kraken and Blockchain.com, as well as the now-defunct FTX, in which it invested $250,000 in July 2021. Other DCG-funded companies include American bank Silvergate and digital wallet company Circle.

It has also invested in more obscure names like crypto lottery app Jackpocket, digital artist Beeple’s NFT company WENEW, and customizable Ethereum wallet provider Rainbow, according to its website. The portfolio is valued at about $500 million, people familiar with the matter said.

One of the people added that DCG’s venture investments were illiquid and likely to take some time to sell, especially as investors had given up on funding new projects since the collapse of FTX and amid a global economic crisis.

Founded in 2015 by Silbert, a former Houlihan Lokey banker, DCG is one of the largest and oldest sponsors of cryptocurrencies and companies. It was valued at $10 billion in 2021 and backed by top tier investors including SoftBank, Ribbit Capital and Alphabet’s venture arm CapitalG.

Tensions with creditors became public this month. On Tuesday, Cameron Winklevoss asked the DCG board to fire Silbert, who he said was “inappropriate” to run the group.

A few hours later, Silbert wrote to shareholders saying that the crypto industry had been “nearly destroyed by an unprecedented wave of fraud and criminal behavior” in the past year and that DCG was “making significant changes to position the company for long-term success. deadline”.

Glenn Hutchins, the billionaire co-founder of private equity group Silver Lake, left DCG’s board last year, the Financial Times previously reported. Former US Treasury Secretary Larry Summers also stopped advising the group.

Retail customers were caught in the middle of the situation, with some Gemini customers, whose funds are trapped in Genesis, having invested hundreds of thousands of dollars each.

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