I wanted to bring to your attention a potentially concerning situation at Genesis, a major cryptocurrency broker, trader, and lender that is owned by Digital Currency Group (DCG).
In November, the lending division of Genesis stopped accepting redemptions and new loan applications, and some creditors have even hired restructuring attorneys in an effort to prevent bankruptcy.Genesis owes money to a number of parties, including Gemini, which is suing Genesis and DCG to recover $900 million, and another unnamed company that is also owed $900 million. This means that the financial gap may be at least $1.8 billion.
DCG has disclosed a $2 billion intercompany debt with Genesis, with a $575 million payment due to Genesis in May 2023. This loan could have been used to fund investment opportunities and buy back stock from Grayscale shareholders, another DCG company. However, there may be a maturity mismatch here because the loan appears to be short-term, whereas private investments can take years to bear fruit.
In addition, as a result of assuming Genesis's liabilities following the Three Arrows Capital collapse earlier in 2022, DCG has a $1.1 billion promissory note due in 2032, as well as a $350 million credit facility from a group of lenders led by Eldridge.
Last week, the Fir Tree family of hedge funds filed a complaint in the state of Delaware against Grayscale Investments and its GBTC trust, citing "serious questions about Grayscale's mismanagement of the Trust and the troubling reports about liquidity issues within Digital Currency Group and its corporate affiliates."
In its complaint, Fir Tree accuses GBTC of selling "an immense number of new shares" between 2018 and 2021, partially through a TV ad campaign that was personally promoted over social media by Grayscale's Founder and CEO Barry Silbert and Grayscale's CEO Michael Sonnenshein. Fir Tree alleges that this #DropGold campaign was targeted at retail investors, to whom GBTC was not permitted to directly sell, but who could purchase GBTC shares on the secondary market.
This further adds to the potential concerns surrounding the financial stability of DCG and its subsidiaries
It's worth noting that Grayscale's Bitcoin Trust currently has over $10 billion in assets under management, which represents approximately 600,000 bitcoins. The Grayscale Bitcoin Trust (OTC: GBTC) currently trades at a discount of more than 45% to its net asset value.
If DCG were to liquidate part of the Trust's bitcoin holdings, it could potentially have a significant impact on the bitcoin price and the crypto market as a whole. It is estimated that DCG and its affiliates currently own around 10% of the Grayscale Bitcoin Trust.
Will continue to monitor this situation closely and appreciate any additional insights or information that anyone may have.
If you're interested in staying up-to-date with my writing, I would really appreciate it if you could consider subscribing.
Also, if you enjoy the content, I would be grateful if you could give it a like or share it with your friends.
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Is the Trojan Horse of Crypto Unravelling? Digital Currency Group Hiding a Major Financial Crisis ? #crypto
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Hey guys,
I wanted to bring to your attention a potentially concerning situation at Genesis, a major cryptocurrency broker, trader, and lender that is owned by Digital Currency Group (DCG).
In November, the lending division of Genesis stopped accepting redemptions and new loan applications, and some creditors have even hired restructuring attorneys in an effort to prevent bankruptcy.Genesis owes money to a number of parties, including Gemini, which is suing Genesis and DCG to recover $900 million, and another unnamed company that is also owed $900 million. This means that the financial gap may be at least $1.8 billion.
DCG has disclosed a $2 billion intercompany debt with Genesis, with a $575 million payment due to Genesis in May 2023. This loan could have been used to fund investment opportunities and buy back stock from Grayscale shareholders, another DCG company. However, there may be a maturity mismatch here because the loan appears to be short-term, whereas private investments can take years to bear fruit.
In addition, as a result of assuming Genesis's liabilities following the Three Arrows Capital collapse earlier in 2022, DCG has a $1.1 billion promissory note due in 2032, as well as a $350 million credit facility from a group of lenders led by Eldridge.
Last week, the Fir Tree family of hedge funds filed a complaint in the state of Delaware against Grayscale Investments and its GBTC trust, citing "serious questions about Grayscale's mismanagement of the Trust and the troubling reports about liquidity issues within Digital Currency Group and its corporate affiliates."
In its complaint, Fir Tree accuses GBTC of selling "an immense number of new shares" between 2018 and 2021, partially through a TV ad campaign that was personally promoted over social media by Grayscale's Founder and CEO Barry Silbert and Grayscale's CEO Michael Sonnenshein. Fir Tree alleges that this #DropGold campaign was targeted at retail investors, to whom GBTC was not permitted to directly sell, but who could purchase GBTC shares on the secondary market.
This further adds to the potential concerns surrounding the financial stability of DCG and its subsidiaries
It's worth noting that Grayscale's Bitcoin Trust currently has over $10 billion in assets under management, which represents approximately 600,000 bitcoins. The Grayscale Bitcoin Trust (OTC: GBTC) currently trades at a discount of more than 45% to its net asset value.
If DCG were to liquidate part of the Trust's bitcoin holdings, it could potentially have a significant impact on the bitcoin price and the crypto market as a whole. It is estimated that DCG and its affiliates currently own around 10% of the Grayscale Bitcoin Trust.
Will continue to monitor this situation closely and appreciate any additional insights or information that anyone may have.
If you're interested in staying up-to-date with my writing, I would really appreciate it if you could consider subscribing.
Also, if you enjoy the content, I would be grateful if you could give it a like or share it with your friends.
Share
Thank you.