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Cryptocurrency brokerage Genesis owes creditors more than $3 billion, prompting its owner Digital Currency Group, or DCG, to explore selling assets from its sprawling venture capital portfolio to raise funds, according to people familiar with the matter.
DCG is a conglomerate that controls cryptocurrency media outlet CoinDesk and investment management firm Grayscale. DCG is looking to raise fresh funding after Genesis succumbed to the FTX storm last November.
As part of that effort, DCG is considering selling some of its venture capital assets, including 200 cryptocurrency-related projects (such as exchanges, banks and custodians) in at least 35 countries, worth about $500 million, according to people familiar with the matter. Dollar.
Genesis’ debt to creditors, the size of which has not been previously reported, underscores the enormity of the Connecticut-based DCG’s fundraising task. As the group struggled following the debacle of cryptocurrency exchange FTX, its efforts to seek outside funding failed to generate interest. The group is also involved in a high-profile dispute with the Winklevoss twins, whose cryptocurrency exchange Gemini previously used Genesis in its lending scheme.
A wholly owned subsidiary of DCG, Genesis was once one of the largest lenders in the cryptocurrency market, allowing clients to lend their tokens in exchange for high yields. However, following FTX’s debacle, it stopped customer withdrawals last November, citing “unprecedented market volatility.”
Genesis owes creditors more than $3 billion, two people familiar with the matter said. DCG declined to comment. Genesis did not respond to a request for comment.
Genesis has hired investment bank Moelis to help explore options, but talks to secure outside funding have so far been fruitless. Barry Silbert, DCG’s chief executive, told shareholders on Tuesday that the group had cut 30 per cent of Genesis’ staff and had recently closed its wealth management business in an effort to reduce costs.
Genesis’ debts include $900 million owed to Gemini clients, €280 million owed to Dutch exchange Bitvavo, and money owed to clients of cryptocurrency savings firm Donut. Another group of Genesis creditors is being represented by attorneys at law firm Proskauer Rose, according to people familiar with the matter.
DCG operates one of the largest venture capital portfolios in the cryptocurrency space, investing in a range of cryptocurrency exchanges, including Coinbase, Kraken, and Blockchain.com, as well as the now-defunct FTX; it invested $250,000 in FTX in July 2021 . Other companies DCG has invested in include Silvergate Bank of the United States and digital wallet company Circle.
The group has also invested in lesser-known names such as cryptocurrency lottery app Jackpocket, digital artist Beeple’s non-fungible token (NFT) company WENEW, and customizable Ethereum, according to the DCG website. ) wallet provider Rainbow. The portfolio is valued at about $500 million, the people said.
One of the people added that DCG’s venture capital is illiquid and it will likely take a while to sell, especially since investors have pulled back on new ventures in the wake of the FTX storm and the global economic downturn. .
Founded in 2015 by Silbert, who used to work in investment banking at Houlihan Lokey, DCG is one of the largest and earliest investors in cryptocurrencies and companies. It is valued at $10 billion in 2021 and is backed by blue-chip investors including SoftBank, Ribbit Capital and Alphabet’s venture arm CapitalG.
The conflict with creditors became public this month. On Tuesday, Gemini co-founder Cameron Winklevoss called on DCG’s board to fire Silbert, saying he was “unfit” to run the group.
Hours later, Silbert wrote to shareholders saying that the cryptocurrency industry was “nearly destroyed by an unprecedented wave of fraud and crime” last year and that DCG was “making meaningful changes to position the company for long-term success.” “.
The FT previously reported that billionaire Glenn Hutchins, co-founder of private equity group Silver Lake, had resigned from DCG’s board last year. Larry Summers, the former US treasury secretary, is also no longer an adviser to the group.
Retail investors were caught in the middle, with some Gemini clients whose funds were locked up by Genesis investing hundreds of thousands of dollars each.