The contagion effects of the FTX collapse seem not to end anytime soon as more crypto companies continue to bite the dust. Genesis global capital is the latest casualty, a development that has roped in its parent company Digital Currency Group and its sister firms, including Grayscale Investments and Genesis Global Trading.
Barry Silbert, CEO of the New Jersey-based Digital Currency Group (DCG), addressed shareholders on Tuesday. He reassured them that the company is still very much in operation and will emerge very strong from the ongoing crypto winter, regardless of the position of more prominent contemporaries in the crypto space.
“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,” he wrote in the letter. “We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger.” Silbert said.
DCG’s current challenges
The digital currency group has 200 companies under its purview, with companies like Grayscale Investments and crypto brokerage Genesis Trading topping the list.
Even though these companies claim to be independent entities, the series of intercompany loans, as revealed by the DCG boss’s letter, put their independent status to question.
What are the steps taken by DCG so far?
The DCG boss acknowledged that all withdrawals are currently pending, and it’s a temporary measure to manage the spike in withdrawal requests that preceded the news of the FTX collapse.
“This is an issue of liquidity and duration mismatch in the Genesis loan book. Importantly, these issues have no impact on Genesis’ spot and derivatives trading or custody businesses, which continue to operate as usual,” he said.
As DCG’s efforts to navigate the current murky waters caused by the FTX implosion, the board of directors of Genesis decided to hire a financial and legal advisor, Silbert, to calm the fears of a potential misappropriation of company funds.
He said monies from secured loans were used to fund different projects and to repurchase DCG stock from non-employee shareholders in secondary transactions.
“For those unaware, in the ordinary course of business, DCG has borrowed money from Genesis Global Capital in the same vein as hundreds of crypto investment firms,” the CEO stated. “These loans were always structured on an arm’s length basis and priced at prevailing market interest rates. DCG currently has a liability to Genesis Global Capital of ~$575 million, which is due in May 2023.” Silbert said in a statement.
The DCG boss revealed they’ve received some investment offers in the last few days but cannot honor them because they currently have no financing round program and will not hesitate to announce it when they start a new funding round.
“Despite the difficult industry conditions, I am as excited as ever about the potential for cryptocurrencies and blockchain technology over the coming decades and DCG is determined to remain at the forefront,”
Recall that the DCG is one of the big names in the crypto space; it doubles as the owner of Grayscale Investments and the embattled crypto lender Genesis Trading.