- Digital Currency Group claims that it is aiming to rebuild its balance sheet by cutting operational costs and conserving liquidity.
- Barry Silbert founded DCG in 2015.
Digital Currency Group (DCG), a venture capital company, informed its shareholders that it is pausing quarterly dividend payments till further notice, in order to conserve liquidity. On January 17, the company sent a letter to shareholders in which it clarified that the company is aiming to build up the balance sheet by cutting operational costs and conserving liquidity.
DCG’s balance sheet got to its present form after it took on the financial troubles of its subsidiary Genesis Global Trading, which owes its creditors $3 billion. DCG is also looking to sell some of its assets.
At present, clients are not able to withdraw funds from Genesis and the suspension of withdrawals was implemented on November 16. Following the suspension, Cameron Winklevoss, co-founder of Gemini Exchange, which suspended withdrawals because it was exposed to Genesis by virtue of the partnership (Gemini Earn), called for the directors of DCG to throw out Barry Silbert as its Chief Executive Officer.
As per Winklevoss, Genesis has $900 million that is payable to Gemini. The capital was given to Genesis as a part of Gemini’s Earn program which allows clients to earn up to 7.4% of the annual yield on their crypto holdings. He also purported that Digital Currency Group has $1.675 billion which is payable to Genesis. Silbert denied that Genesis owed DCG; however, did not comment on the $900 million.
Winklevoss made these accusations in an open letter that he tweeted to which Silbert responded. Soon after the mud-slinging ensued, the United States Securities and Exchange Commission (SEC) charged both companies on January 12 for offering unregistered securities via the Earn program.
On November 16, 2022, Genesis suspended withdrawals for its users explaining that it was facing a liquidity crunch because of its exposure to the cryptocurrency exchange FTX. FTX filed for bankruptcy on November 11 and its co-founder Sam Bankman Fried is out on bail. Several crypto companies including investment companies and crypto exchanges filed for bankruptcy in the aftermath of FTX’s bankruptcy.
On November 10, Genesis disclosed that it has almost $175 million stuck on FTX, as a result of which, DCG sent Genesis an emergency equity infusion of $140 million.
Source: https://www.thecoinrepublic.com/2023/01/18/digital-currency-group-hits-the-brakes-on-dividends-in-order-to-conserve-liquidity/