DCG’s crypto broker Genesis owes creditors more than $3bn

Crypto broker Genesis owes creditors more than $3bn, prompting its owner Digital Currency Group to explore selling assets in its large venture portfolio to raise money, according to people familiar with the matter.

DCG, a conglomerate that controls crypto media outlet CoinDesk and investment manager Grayscale, is seeking to raise fresh cash after its Genesis unit was wrongfooted in November by the collapse of FTX.

As part of its efforts, DCG is considering offloading parts of its venture capital holdings, which include 200 crypto-related projects such as exchanges, banks and custodians in at least 35 countries, and is worth about $500mn, according to people familiar with the matter.

Genesis’s debts to creditors, the scale of which have not been previously reported, underscore the magnitude of the fundraising task for Connecticut-based DCG, whose search for outside funding has failed to draw interest as the group struggles in the wake of the collapse of crypto exchange FTX. The group is also lodged in a high-profile dispute with the Winklevoss twins, whose crypto exchange Gemini used Genesis in its lending programme.

Genesis, DCG’s wholly owned subsidiary, was one of the biggest lenders in the crypto market, allowing customers to lend out their coins in return for high yields. However, it halted customer withdrawals in November after the implosion of FTX, blaming “unprecedented market turmoil”.

Genesis owes creditors more than $3bn, two of the people said. DCG declined to comment. Genesis did not respond to requests for comment.

Genesis has hired investment bank Moelis to help explore its options but talks for outside funding have so far failed to materialise. DCG chief executive Barry Silbert told shareholders on Tuesday that the group had cut 30 per cent of the workforce at Genesis and recently shut its wealth management business in an effort to reduce costs.

Genesis’s debts include $900mn to customers of Gemini, €280mn to Dutch exchange Bitvavo, and also money to customers of crypto savings company Donut. A separate group of Genesis creditors are being represented by lawyers from Proskauer Rose, according to people familiar with the matter.

DCG has run one of crypto’s biggest venture portfolios, backing a range of crypto 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.

It has also invested in more obscure names such as crypto lottery app Jackpocket, digital artist Beeple’s NFT company WENEW and customisable Ethereum wallet provider Rainbow, according to its website. The portfolio is valued at about $500mn, people familiar with the matter said.

One of the people added that DCG’s venture investments were illiquid and were likely to take some time to sell, especially since investors had pulled back from funding new projects since FTX collapsed and amid a global economic downturn.

Founded in 2015 by Silbert, a former Houlihan Lokey banker, DCG is one of the largest and earliest backers of crypto coins and companies. It was valued at $10bn in 2021 and backed by blue-chip investors including SoftBank, Ribbit Capital and Alphabet’s venture arm CapitalG.

Tensions with creditors burst into public this month. On Tuesday, Cameron Winklevoss called for DCG’s board to sack Silbert, who he said was “unfit” to run the group.

A few hours later, Silbert wrote to shareholders saying the crypto industry had last year “been all but destroyed by a wave of unprecedented fraud and criminal behaviour” and that DCG was “making meaningful changes to position the firm for long-term success”.

Glenn Hutchins, the billionaire co-founder of private equity group Silver Lake, stepped down from DCG’s board last year, the Financial Times previously revealed. Former US Treasury secretary Larry Summers has also stopped advising the group.

Retail customers have been caught in the middle of the situation, with some customers of Gemini whose funds are trapped at Genesis having invested hundreds of thousands of dollars each.