Genesis: the billionaire debt of the crypto broker

Genesis, the crypto broker of Digital Currency Group (DCG), has a debt of more than $3 billion. Its owner is considering selling venture assets to raise funds and resolve the issue. 

Genesis and the new $3 billion debt 

According to Financial Times, it appears that the crypto broker of Digital Currency Group (DCG), Genesis, owes its creditors well over $3 billion. In this regard, it appears that DCG is considering selling venture assets to raise the funds to settle the debt. 

Specifically, DCG is considering selling parts of its venture capital holdings, which include 200 cryptocurrency-related projects, such as exchanges, banks, and depositories in at least 35 countries, worth about $500 million. 

Apparently, Genesis is literally struggling in the wake of the collapse of the FTX crypto-exchange. And indeed, Genesis, a wholly owned subsidiary of DCG, was one of the largest lenders in the cryptocurrency market, allowing customers to lend their coins in exchange for high returns. 

The CEO of DCG, Barry Silbert, told shareholders Tuesday that the group has cut 30% of Genesis’ workforce and recently shut down its wealth management business in an effort to cut costs.

However, it halted client withdrawals in November after FTX imploded, blaming “unprecedented market turbulence.” In fact, even at the time, the company had $175 million in funds locked up on FTX and had already received $140 million to cover losses. 

Genesis: $900 million in debt is owed to Gemini’s crypto clients

In general, it appears that Genesis’ debts include $900 million owed to Gemini customers, 280 million owed to the Dutch exchange Bitvavo, and also money owed to customers of cryptocurrency saving company Donut.

In the specific case of the Winklevoss twins’ crypto exchange, Gemini, there is more at stake than just debt to be paid off, there is also a dispute involving the crypto-exchange’s use of Genesis as part of its lending program. 

In this regard, Cameron Winklevoss, raised the issue on Twitter, sharing a letter addressed specifically to DCG.

Earn Update: An Open Letter to the Board of @DCGco pic.twitter.com/eakuFjDZR2

— Cameron Winklevoss (@cameron) January 10, 2023

Basically, Winklevoss claims that Genesis lent more than $2.3 billion to the now-defunct hedge fund Three Arrows Capital, leaving it with a $1.2 billion loss when the company went bankrupt in June 2022. 

In addition, Gemini said it lent more than $900 million in customer deposits to Genesis as part of its Earn program. The Gemini Earn and Genesis Global dispute has affected more than 340,000 users.

The SEC is also working on DCG’s financial conglomerate case

US authorities are also digging into all the financial dealings between DCG’s crypto companies. And indeed, the SEC is apparently already requesting documents and interviews to work on the case. 

Not only that, according to rumors it actually appears that DCG is under investigation, although this has not been officially confirmed. 

After all, the company founded by Silbert in 2015 has become one of the largest and earliest financiers of crypto coins and companies. Its valuation in 2021 was $10 billion, thanks in part to the backing of its top-notch investors, including SoftBank, Ribbit Capital, and CapitalG, the venture arm of Alphabet.

Not only that, DCG has managed one of the largest cryptocurrency risk portfolios, backing a number of cryptocurrency exchanges, including Coinbase, Kraken and Blockchain.com, as well as the now-defunct FTX, in which it invested $250,000 in July 2021. 

Other companies funded by DCG include US bank Silvergate and digital wallet company Circle, but DCG also appears to have invested in more obscure names such as crypto lottery app Jackpocket, digital artist Beeple’s NFT company WENEW, and customizable Ethereum wallet provider Rainbow.