Key Takeaways
- • Genesis Global Capital, the lending arm of Digital Currency Group (DCG), suspended redemptions and new loan originations on November 16, 2022, citing market dislocation caused by the FTX implosion, according to company spokesman Amanda Cowie.
- • DCG, founded by Barry Silbert in 2015, was valued at US$10 billion after a US$700 million private stock sale led by SoftBank Group in the prior year, and controls Grayscale Investments, Foundry Digital, CoinDesk and Luno.
- • Genesis' lending business had already been strained by its exposure to the collapse of Three Arrows Capital, where DCG assumed some liabilities and filed a US$1.2 billion claim against the liquidating fund.
- • Grayscale's US$10.7 billion Grayscale Bitcoin Trust (GBTC) trades at a record discount to its bitcoin holdings, yet still generates an estimated US$200 million-plus in annual fees at current asset levels, per Bloomberg calculations.
- • DCG reshuffled its C-suite, promoting Mark Murphy to president, while about 10 employees exited and several Genesis trading and risk personnel departed.
Summary
Genesis Global Capital, the lending business of crypto conglomerate Digital Currency Group (DCG), suspended withdrawals and new loan originations amid a widening crypto-market meltdown triggered by the collapse of exchange FTX and its former chief executive Sam Bankman-Fried. According to Bloomberg, the move casts an unwanted spotlight on DCG founder Barry Silbert, who founded the firm in 2015 and rarely gives press interviews. DCG declined to make Silbert available for an interview. Genesis said its spot and derivatives trading and custody businesses remain fully operational, and interim CEO Derar Islim confirmed that the halt affects only lending. Genesis spokesman Amanda Cowie said the decision was made "in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion" and that it has no impact on DCG's operations or other wholly owned subsidiaries.
The pressure on Genesis predates the FTX collapse. Genesis was the largest creditor caught in the bankruptcy of hedge fund Three Arrows Capital, which failed to meet margin calls. DCG assumed some of those liabilities and filed a US$1.2 billion claim against Three Arrows, which is under liquidation. Genesis had reported in October that its lending volume fell 80 per cent in the third quarter. Bloomberg noted that DCG was valued at US$10 billion (S$13.7 billion) last year after selling US$700 million of stock in a private sale led by SoftBank Group, and that it holds more than 200 portfolio companies with 66 employees as of early November.
DCG's broader portfolio is significant. Beyond Genesis, the firm controls Grayscale Investments, which runs the largest crypto fund, as well as Foundry Digital, CoinDesk and exchange Luno. Its past investments have included Coinbase, hardware wallet maker Ledger and crypto-focused bank Silvergate. Grayscale said its products are functioning normally, but the Grayscale Bitcoin Trust (GBTC), with US$10.7 billion in assets, trades at a record discount to the bitcoin it holds because its structure does not permit redemptions. Grayscale sued the US Securities and Exchange Commission in June after the regulator denied its application to convert GBTC into an exchange-traded fund. Despite the discount, Bloomberg calculations show the trust's 2 per cent annual fee would still generate over US$200 million per year for Grayscale at current asset levels, although GBTC has lost billions in value since its assets peaked above US$40 billion in November 2021.
Amid the turmoil, DCG restructured its leadership, promoting Mark Murphy from chief operating officer to president. The restructuring led to the exit of about 10 employees. Several Genesis trading-desk personnel, its head of market insights and its chief risk officer have also left the company.
The pressure on Genesis predates the FTX collapse. Genesis was the largest creditor caught in the bankruptcy of hedge fund Three Arrows Capital, which failed to meet margin calls. DCG assumed some of those liabilities and filed a US$1.2 billion claim against Three Arrows, which is under liquidation. Genesis had reported in October that its lending volume fell 80 per cent in the third quarter. Bloomberg noted that DCG was valued at US$10 billion (S$13.7 billion) last year after selling US$700 million of stock in a private sale led by SoftBank Group, and that it holds more than 200 portfolio companies with 66 employees as of early November.
DCG's broader portfolio is significant. Beyond Genesis, the firm controls Grayscale Investments, which runs the largest crypto fund, as well as Foundry Digital, CoinDesk and exchange Luno. Its past investments have included Coinbase, hardware wallet maker Ledger and crypto-focused bank Silvergate. Grayscale said its products are functioning normally, but the Grayscale Bitcoin Trust (GBTC), with US$10.7 billion in assets, trades at a record discount to the bitcoin it holds because its structure does not permit redemptions. Grayscale sued the US Securities and Exchange Commission in June after the regulator denied its application to convert GBTC into an exchange-traded fund. Despite the discount, Bloomberg calculations show the trust's 2 per cent annual fee would still generate over US$200 million per year for Grayscale at current asset levels, although GBTC has lost billions in value since its assets peaked above US$40 billion in November 2021.
Amid the turmoil, DCG restructured its leadership, promoting Mark Murphy from chief operating officer to president. The restructuring led to the exit of about 10 employees. Several Genesis trading-desk personnel, its head of market insights and its chief risk officer have also left the company.
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