DCG owes creditors over $3B, considering $500M VC portfolio sale

Cryptocurrency broker Genesis Global Trading allegedly owes its creditors more than $3 billion, according to a Jan. 12 report from the Financial Times. Its parent, the Digital Currency Group (DCG), which also owns Grayscale Investments and its series of digital asset trusts, seeks to sell part of its venture capital holdings to offset the shortfall.

According to people familiar with the matter, DCG’s venture arm has more than 200 crypto-related projects “such as exchanges, banks and custodians in at least 35 countries,” with a total valuation of around $500 million. Genesis reportedly hired investment bank Moelis to explore strategic alternatives, although people familiar with the matter said there was little capital infusion interest. On Jan 5., Genesis laid off 30% of its staff as a cost-cutting measure, a second of its kind in six months’ time. 

On Jan. 12, DCG chief Barry Silbert wrote to shareholders that “bad actors and the implosion of leading crypto companies had wreaked havoc on the industry.” Silbert also disclosed that Three Arrows Capital still owes Genesis $447.5 million and 4,550 Bitcoin (BTC) worth $78 million, which matures in May 2023. Three Arrows Capital is currently in bankruptcy proceedings and creditors have expressed severe frustration towards the process. 

Cointelegraph reported on November 16, 2022, that Genesis halted withdrawals citing “unprecedented market turmoil.” At the time, the company reportedly had $175 million worth of funds stuck on FTX and had already received a $140 million equity infusion to cover losses. 

Previously, it was thought that Genesis Global had an estimated shortfall of $1 billion. According to Cameron Winklevoss, co-founder of cryptocurrency exchange Gemini, Genesis lent more than $2.3 billion to now-defunct hedge fund Three Arrows Capital, leaving it with a $1.2 billion loss when the firm failed in June 2022. Gemini said it lent over $900 million worth of customer deposits to Genesis as part of its Earn program. More than 340,000 users are affected in the wake of the Gemini Earn <> Genesis Global dispute.

This is a developing story, and further information will be added as it becomes available.