Barry Silbert, founder of cryptocurrency conglomerate digital currency groupjoined the list of industry leaders trying to calm investors’ nerves after FTX’s sudden demise.
In Tuesday’s note to shareholders, Silbert addressed all the “noise” about the financial health of DCG’s subsidiaries. This includes trading companies Genesis, Grayscale Investments, and mining company Foundry.
FTX Rapid wind down Two weeks ago, investors worried that the cryptocurrency epidemic would affect every corner of the industry. Lenders stopped lending, withdrawals became more difficult, regulation disappeared, and the value of a little-understood token plummeted. major cryptocurrencies, Bitcoin When etheralso continuing their one-year descent.
Silbert, an early Bitcoin evangelist who founded DCG in 2015, said despite the crypto winter, the company as a whole has raised just $25 million in capital since its inception. He said it is on pace to generate $800 million in revenue this year. forbes Silbert’s net worth is estimated at $2 billion.
“We have survived the crypto winter so far,” wrote Silbert, adding, “This time it may feel more serious, but we will come out stronger overall.”
coin base, binance When crypto dot com Similarly, we have done our best to allay our customers’ concerns to avoid FTX-type execution on their deposits. We emphasized that our clients’ assets are safe.
It’s all in recognition that FTX and founder Sam Bankman-Fried have betrayed the trust of an industry that was already in the midst of brutal losses. Two days before he desperately wanted a bailout, he said his company’s assets were “no problem.”
Unique to DCG, investor confidence took a hit last week. The Wall Street Journal reported Genesis was looking to raise $1 billion from investors, but eventually stopped withdrawing some.
Fear Spreads on Grayscale Bitcoin Trust Known for Tickers GBTC, which allows investors to access Bitcoin through more traditional security. GBTC is currently 42% discount from Bitcoin Nearly 30% discount two months ago.
Regarding Genesis’ lending business, Silbert said in the letter that the Nov. 16 maturity and suspension of new loan openings was a “liquidity and duration mismatch issue” on the loan book. These issues “have not impacted” Genesis’ spot and derivatives trading or custody businesses, which “continue to operate as normal,” he said.
He confirmed that Genesis is hiring financial and legal advisers as it considers its options.
DCG has just over $2 billion in debt. The company has loaned Genesis about $575 million, at a price that is expected in May 2023 at the prevailing market interest rate. It also absorbed $1.1 billion in debt owed to Genesis by failed cryptocurrency hedge fund Three Arrows Capital.
With Three Arrows bankrupt, DCG is “pursuing all available remedies to restore assets to the benefit of its creditors,” writes Silbert. DCG’s only other The liability is a $350 million line of credit from “a small group of lenders led by Eldridge.”
Read the full letter from Silbert below.
To our shareholders
There has been a lot of commotion this past week. I would like to contact you directly to clarify the DCG’s position.
Most people are aware of the Genesis situation, but to summarize up front, Genesis Global Capital, the lending business of Genesis, temporarily closed Wednesday, Nov. 16, after market turmoil sparked unprecedented withdrawal requests. We have stopped redeeming and initiating new loans. Importantly, these issues have not impacted Genesys’ spot and derivatives trading or custody businesses, which continue to operate as normal. Genesis’ management and its board of directors have decided to hire financial and legal advisors, and the company is exploring all possible options in the aftermath of his FTX implosion.
Recently, there was talk of an intercompany loan between Genesis Global Capital and DCG. For those who don’t know, in the normal course of business, DCG has borrowed money from Genesis Global Capital like hundreds of cryptocurrency investment firms. These loans are always structured on an arm’s length basis and priced at prevailing market interest rates. DCG currently owes approximately $575 million to Genesis Global Capital and is due to be repaid in May 2023. These loans were used to fund investment opportunities and to buy back his DCG shares from non-employee shareholders in a secondary transaction previously highlighted in the quarterly shareholder update. And to this day, I have never sold a single share of his DCG stock.
You may also recall that there is a $1.1 billion promissory note due in June 2032. As we shared in our previous shareholder letter in August 2022, DCG stepped in and assumed certain liabilities from Genesis related to Three Arrows Capital’s default. As we noted in August, these are now DCG’s liabilities, DCG is participating in the Three Arrows Capital liquidation proceedings of the Board of Creditors and will be used to recover the assets for the benefit of its creditors. We are pursuing all possible remedies. Aside from Genesis Global Capital’s intercompany loan and long-term promissory note due in May 2023, DCG’s only debt is a small lender led by Eldridge. A $350 million credit facility from the Group.
Let me take a step back and clarify. DCG continues to be an industry-leading builder and is committed to its long-term mission to accelerate the development of a better financial system. We’ve weathered the crypto winter so far, and while it may feel more severe this year, it will come out stronger overall. DCG has raised only $25 million in initial funding and he is on pace to bring in $800 million in revenue this year.
I bought my first bitcoin 10 years ago in 2012 and made a long-term commitment to the industry. In 2013, he founded his first BTC trading company, Genesis, and his first BTC fund, which has now evolved into Grayscale, the world’s largest digital currency asset management company. Foundry operates the world’s largest Bitcoin mining pool, building tomorrow’s decentralized infrastructure. CoinDesk, the premier media, data and events company in the industry, has done an amazing job covering this crypto winter. Luno is one of the world’s most popular crypto wallets and an industry leader in emerging markets. TradeBlock is building a seamless institutional trading platform and HQ is the latest subsidiary to establish a living and wealth management platform for digital asset entrepreneurs. Each of these subsidiaries is an independent business that is independently managed and operating normally. Finally, with a portfolio of over 200 companies and funds, we often check the industry’s best founders first.
Thank you for your words of encouragement and support along with your offer to invest in DCG. If we decide to do a funding round, we will let you know.
Despite the tough times in the industry, I am as excited as ever about the possibilities of cryptocurrency and blockchain technology for decades to come, and DCG is determined to stay at the forefront.