Barry Silbert, chief executive officer of Digital Currency Group (DCG), disclosed his company owes a US$575 million loan and a US$1.1 billion promissory note to its subsidiary Genesis Global Capital, the struggling crypto lender that paused withdrawals and new loans on Nov. 16. This was told to investors via a letter seen by the Wall Street Journal.
See related article: Genesis crypto broker freezes withdrawals; Winklevoss’s Gemini, S. Korea’s GOPAX exchanges affected
- DCG used the US$575 million loan, due in May 2023, to fund investments. While the US$1.1 billion promissory note, due in June 2023, was issued after DCG took over Genesis’ exposure from the Three Arrows Capital default, Silbert said the loans were arm’s length transactions priced at market rates.
- Crypto companies face increased scrutiny on intercompany loans after the collapse of FTX, as the now-bankrupt crypto exchange lent customer assets to affiliate Alameda Research to fund trades now seen as risky.
- Genesis has US$175 million locked in on its FTX trading account and was looking to raise US$1 billion from investors, according to a previous WSJ report, to tide over a liquidity crunch before it resorted to suspending redemptions.
- Genesis has hired investment bank Moelis & Co. to explore how to shore up its crypto-lending business’ liquidity and address client needs, according to a memo sent by Genesis interim CEO Derar Islim to customers that was reported by CoinDesk.
- Blake Cassidy of Bamboo 61 Pty Ltd. said: “All eyes this week are following the Genesis situation as they look to raise $1 billion before Friday to fill a shortfall. If they fail, it could call into question the stability of Barry Silbert’s DCG which is possibly the most prominent investment firm in the sector.”
See related article: The crash and burn of FTX: What lessons does it teach us?