3AC Collapse Costs DCG $1B

The Digital Currency Group (DCG) has reported losses worth $1 billion in 2022 in the aftermath of the collapse of Three Arrows Capital (3AC). 

3AC Owes DCG $2B

DCG recently released the investor report for Q4 2022, where it reported losses worth $1.1 billion as a direct result of the collapse of the crypto hedge fund. DCG is the parent company of the crypto lending firm Genesis, which filed for Chapter 11 bankruptcy in January 2023. The firm is reportedly 3AC’s largest creditor, owing the now-bankrupt hedge fund around $2.36 billion in funds. DCG also reportedly had to halt its quarterly dividend payments in an effort to conserve cash and improve its balance sheet.

An excerpt from the investor report reads, 

“In addition to the negative impact of [bitcoin] and crypto asset price declines, last year’s results reflect the impact of the Three Arrows Capital (TAC) default upon Genesis.” 

Revenue Reports For 2022

DCG’s report reveals that Q4 has raked in $143 million in revenue and $24 million in losses. However, the company raked in only $719 million for the entire year of 2022 while holding assets worth $5.3 billion in cash and $262 million in investments. The company also reported share investments in the range of $600 million, with the remaining assets being held by divisions of its asset management subsidiary Grayscale and DCG’s BTC mining enterprise, Foundry Digital. 

The report also revealed that the company’s equity had been valued at $2.2 billion, at a rate of $27.93 per share. Due to the 75%-85% decline that affected the sector last year, many believe that this valuation is quite consistent with the market conditions. 

Genesis Restructuring

Genesis underwent a restructuring recently, under which creditors could get back 80% of their invested funds. DCG and Genesis Global had reached an agreement where the former would contribute its share of equity in Genesis Global Trading (Genesis’s brokerage subsidiary initiative) to Genesis Global Holdco (the holding entity for Genesis). DCG believes that this restructuring is a company milestone and involves pushing the maturity date of DCG’s May 2023 obligations to Genesis Capital till June 2024, which amounts to around $600 million at current market prices. This also includes DCG’s infamous $1 billion promissory note, due in 2032, which will be restructured to a new class of DCCG redeemable, convertible preferred stock. The proposal is up for negotiation and votes and will be in that reorganization stage for several months. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.