Barry Silbert’s DCG: Genesis Fallout Could be Worse Than FTX. Here’s Why
The exposure of crypto trading firm Genesis to bankrupt crypto firms FTX, Three Arrows Capital and Three Arrows Capital is causing Grayscale and its parent Digital Currency Group (DCG), to be infected. It has been revealed that Barry Silbert’s DCG owes Genesis over $1.1 million. Some believe DCG fallout could have a greater ripple effect than FTX.
Andrew Parish, ArchPublic’s co-founder, claimed in a November 21 tweet that Barry Silbert’s DCG owes Genesis $1.1 billion via a previously unrevealed promissory note, which was hidden from potential investors. He believes that hidden funds are the main reason DCG and Genesis seek $1 billion in emergency funding.
“Now we know why DCG is doing $1B raise and is being rebuffed. Grayscale assets are the only assets that have any meaningful interest. DCG will also die if Genesis passes away. (DCG actually owes Genesis $1.1B, but they have been asked not yet to disclose).
To prevent the spread of contagion to DCG or Grayscale, Genesis must receive a $1 billion capital injection today. After disclosing nearly $175 million in a FTX trading account, DCG has already provided $140m to Genesis. It wasn’t enough, and Genesis was forced to halt redemptions, withdrawals and new loan originations.
DCG also rescued Genesis from Three Arrows Capital exposure of $1.2 billion in July. Some believe that failing to raise capital could force Grayscale and DCG to dissolve GBTC or ETHE trusts. These trusts are already trading at a discount of over 40%. This could have a greater impact than the FTX fallout.
Grayscale, however, refused to disclose its proof of reserves due to security concerns. Investors were disappointed by the decision to keep the details of reserves confidential in the FTX crisis and the uncertainty surrounding Genesis. Grayscale Bitcoin Trust Fund’s (GBTC) premium rate has fallen to a staggering -45.2%.
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