Rumours of DCG troubles surface as FTX collapse unfolds

Refusal by Grayscale Investments, the digital asset manager, to disclose reserves andthe suspension by Genesis Global Capital’s OTC platform of crypto-lending operations have raised concerns about the resilience of the entire Digital Currency Group (DCG).

Reiterating this one… if DCG doesn’t bring in $1B over the weekend, next week is going to be worse than this week. https://t.co/TmZkaN0X70

— Andrew (@AP_ArchPublic) November 18, 2022

On November 18, news emerged of Genesis Global Capital emergency financing of $1 billion as of the morning of November 14. The request was filed prior to the suspension of crypto-lending operations after the collapse of FTX.

A day earlier, Nansen discovered a $1.6 billion infusion from Alameda Research in September 2021 from Genesis Global Capital backed by FTX utility tokens. The decline in the value of the latter led to the insolvency of Sam Bankman-Fried’s firms.

According to ArchPublic co-founder Andrew Perrish, Galaxy Digital’s and Grayscale’s refusal to back a major prime broker Genesis Global Capital signals serious problems across the crypto ecosystem. He compared the OTC platform to major investment banks Goldman Sachs and UBS.

Experts pointed to liquidity problems facing any crypto startup and the difficulties facing DCG as a whole. He suggested that the next ‘act’ could be Grayscale, and that it would be ‘more serious than the collapse of Three Arrows Capital’.

More DCG turndowns. Nearly every formerly high flying crypto VC is down bad. Really bad. Liquidity remains a concern for every entity.

**a name to watch that could emerge as a DCG ‘white knight’ — a16z 👀

— Andrew (@AP_ArchPublic) November 19, 2022

По его словам, кредитный портфель Genesis Global CapitalB2C2, Fortress, Jump Crypto, Galaxy и Apollo отказались выкупать. Других сопоставимых по масштабу фирм, которые могли бы прийти на выручку OTC-платформе, нет. В результате кредиторы готовы к ее банкротству, добавил Perrish.

Absolutely zero bids for Genesis and DCG raise.

**Genesis creditors are preparing for an ‘imminent’ bankruptcy filing.

— Andrew (@AP_ArchPublic) November 20, 2022

«Refusal by Grayscale to provide reserves transparency report for the Bitcoin Trust (GBTC) — the only asset that is worth anything, is a serious warning for potential capital partners», — noted a specialist.

Grayscale Investments, a DCG affiliate, declined to provide a reserves transparency report citing security concerns.

They pointed to a long history of constructive cooperation with regulators, third-party auditor assessments, and the custody of assets in each product, created as a separate legal entity, in Coinbase Custody with a prohibition on encumbrance in any way.

Against this backdrop, GBTC’s price relative to NAVNAV hit new record lows. As of November 18 the discount to NAV stood at 45%, AUM — $10.5 billion.

One user ODELL said that in a pitch to potential DCG investors, ‘if you do not save us we will take you down with us.’

DCG’s pitch is «if you do not save us we will take the you down with us.»

That is not the case though. There will be a lot of short term pain, a lot of people will get rekt, some companies that did not properly manage risk will go under, but bitcoin will emerge stronger after. https://t.co/wm2gRKBX5E

— ODELL (@ODELL) November 20, 2022

On November 21, Andrew Perrish learned that DCG owed Genesis $1.1 billion on a previously undisclosed promissory note kept from potential investors.

«Now we know why DCG is trying to raise $1 billion and gets rebuffed. Assets in Grayscale Investments are the only assets attracting any meaningful interest. If Genesis dies, DCG will die as well (DCG actually owes Genesis more than $1.1 billion, but they were asked not to disclose). The two words I heard today were lies and fraud», — explained he.

BREAKING: @DCGco owes $1.1B to Genesis via a previously undisclosed promissory note that has been hidden from potential investors.

**now we know why DCG is doing a $1B raise, and is getting rebuffed. @Grayscale assets are the only assets receiving any meaningful interest.

— Andrew (@AP_ArchPublic) November 20, 2022

According to user alphaketchum, DCG owes $1.7 billion. The loan book is nearly worth 0, the business that formerly served as Grayscale’s cash cow faces default risk and closure. GBTC will be sold/spun off.

DCG
— owes ~1.7 billion
— has a loan book that is nearly worth 0,
— and has a cash-cow business that has maturity / terminal risk
— has a beaten down venture book

The GBTC trust is going to be sold / spun off.

— AJ ( f.k.a Alfa) (@alphaketchum) November 20, 2022

In November 2021, DCG Barry Silbert was valued at $10 billion.

The group includes Grayscale Investments, Genesis, CoinDesk, Luno (acquired in September 2020), and mining company Foundry.

In July 2022, it was revealed that hedge fund Three Arrows Capital owed Genesis Global Capital $2.36 billion. DCG provided support, taking on certain obligations.

In August, Genesis Global Capital chief Michael Moro left the company after seven years, six of them as CEO. Along with him, one-fifth of the platform’s staff were laid off.

Earlier, Multicoin Capital 预计 скорый крах of trading firms due to FTX and said they expected to see new industry statements about problems.

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