DCG’s CEO Reassures Shareholders that Intercompany Lending Not a Concern
Barry Silbert, the founder of crypto investment company Digital Currency Group (DCG), has told shareholders that the company owes $575 million to Genesis Global Capital, the lending arm of Genesis which is also owned by DCG. He also stated that the company is operating as usual. The statement comes as investors worry about a crypto contagion affecting every corner of the industry amid the meltdown of cryptocurrency exchange FTX.
DCG Took a $575M Loan From Genesis Global Capital to Fund Investments
In a letter to shareholders on Tuesday, Silbert said the company owes $575 million to its subsidiary Genesis Global Capital, according to a copy of the letter shared by CNBC. The loan, due in May 2023, was used to “fund investment opportunities” and repurchase stock from non-employee shareholders.
The loan was reportedly issued after Digital Currency Group took over Genesis’ exposure from the Three Arrows Capital default. Back in July, Genesis Global Trading CEO Michael Moro said bankrupt 3AC was the large counterparty that failed to meet a large margin call.
Subsequently, in a series of tweets, Genesis revealed that it has worked with Digital Currency Group to continue to isolate risk. “DCG has assumed certain liabilities of Genesis related to this counterparty to ensure we have the capital to operate and scale our business for the long-term,” Moro said at the time.
Aside from the money owed to Genesis, Digital Currency Group also has a $350 million credit facility from “a small group of lenders” led by investment firm Eldridge and a $1.2 billion claim it filed in July against bankrupt 3AC.
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Genesis Pauses Withdrawals Amid FTX Collapse
Earlier this month, FTX filed for Chapter 11 bankruptcy after failing to secure emergency funding. This was huge particularly since the exchange was considered one of the strongest crypto companies and had even earned itself a reputation as crypto’s bail-out king during the recent crypto meltdown. As per reports, FTX has about $10 billion in liabilities.
Nevertheless, in the wake of FTX’s collapse, Genesis Global Trading announced that it is temporarily suspending redemptions and new loan originations. In a statement on Twitter, Genesis says the “abnormal withdrawal requests” have exceeded its “current liquidity.”
Genesis has also disclosed that it has $175 million locked in on its FTX trading account. However, the company said their “operating capital and net positions in FTX are not material to our business,” which contradicts recent reports that it was looking to raise $1 billion from investors, which failed, and has hired restructuring advisors.
Meanwhile, Silbert tried to reassure investors, claiming that most of its entities are “operating as usual.” He even said that they are on the pace to generate $800 million in revenue this year on the back of just $25 million raised in primary capital since inception. He wrote:
“DCG will continue to be a leading builder of the industry and we are committed to our long-term mission of accelerating the development of a better financial system. We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger.”
Do you think DCG is struggling with liquidity issues? Let us know in the comments below.
