Digital Currency Group founder and CEO Barry Silbert updated shareholders on Tuesday and said the company would come out of the current environment stronger a day after media reports that its Genesis unit faced a possible bankruptcy.
"DCG will continue to be a leading builder of the industry and we are committed to our long-term mission of accelerating the development of a better financial system," he wrote in a note to clients obtained by The Block. "We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger."
- "Genesis Global Capital, Genesis’ lending business, temporarily suspended redemptions and new loan originations last Wednesday, November 16 after market turmoil sparked unprecedented withdrawal requests."
- "This is an issue of liquidity and duration mismatch in the Genesis loan book. Importantly, these issues have no impact on Genesis’ spot and derivatives trading or custody businesses, which continue to operate as usual."
- "Genesis leadership and their board decided to hire financial and legal advisors and the firm is exploring all possible options amidst the fallout from the implosion of FTX."
- "In recent days, there has been chatter about intercompany loans between Genesis Global Capital and DCG. For those unaware, in the ordinary course of business, DCG has borrowed money from Genesis Global Capital in the same vein as hundreds of crypto investment firms. These loans were always structured on an arm’s length basis and priced at prevailing market interest rates. DCG currently has a liability to Genesis Global Capital of ~$575 million, which is due in May 2023. These loans were used to fund investment opportunities and to repurchase DCG stock from non-employee shareholders in secondary transactions previously highlighted in quarterly shareholder updates."
- "We appreciate the words of encouragement and support, along with offers to invest in DCG. We will let you know if we decide to do a financing round."
- "Despite the difficult industry conditions, I am as excited as ever about the potential for cryptocurrencies and blockchain technology over the coming decades and DCG is determined to remain at the forefront."
Genesis Global Capital, the crypto lender owned by DCG, has hired investment bank Moelis & Company to explore options including a potential bankruptcy, the New York Times reported on Tuesday, citing sources. A final decision hasn't been made, and the sources said it was still possible to avoid bankruptcy.
"Our goal is to resolve the current situation without the need for filing a bankruptcy,” a Genesis spokesman told the New York Times.
(Updates with New York Times report.)
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