By Elizabeth Howcroft and Hannah Lang
(Reuters) – U.S. crypto company Digital Currency Group (DCG) is at the center of the industry’s latest meltdown after one of its companies, Genesis, froze customer withdrawals in November.
Genesis said it is working to avoid a bankruptcy, but investors fear its collapse could bring down other connected companies and projects.
Here is what we know about the many companies Digital Currency Group owns:
DCG acquired crypto news website CoinDesk in 2016 after previously investing in the outlet. TechCrunch at the time pegged the deal as being worth about $500,000 to $600,000.
CoinDesk in November published a leaked balance sheet of Alameda Research, the crypto trading firm founded by Sam Bankman-Fried. Many industry observers cited the report as the catalyst for the downfall of Alameda and Bankman-Fried’s crypto exchange FTX, which filed for bankruptcy less than two weeks later.
Genesis Trading was originally the bitcoin trading division at DCG Chief Executive Barry Silbert’s SecondMarket, but relaunched with its new name as a subsidiary of DCG when Silbert started the venture firm in 2015.
Genesis’ crypto lending arm, Genesis Global Capital, announced in November its crypto lending arm would stop making new loans and blocked customers from withdrawing funds, citing the market dislocation caused by the collapse of FTX.
Genesis Global Capital had partnered with a number of other crypto companies, including crypto exchange Gemini, to offer a crypto lending product. Gemini now says its customers are owed $900 million from Genesis.
Genesis owes more than $3 billion to its creditors including Gemini, according to a person familiar with the matter.
DCG itself owes $1.675 billion to Genesis’ crypto lending arm, according to a November letter Silbert sent to shareholders. That includes a $1.1 billion promissory note that appears to be connected with liabilities DCG assumed from Genesis after it was hit hard by the collapse of Singapore-based crypto hedge fund Three Arrows Capital.
Silbert started Grayscale Investments in 2013 after he stepped down as CEO of SecondMarket. After selling SecondMarket to Nasdaq Inc in 2015, he launched DCG, with Grayscale as one of the firm’s subsidiaries.
Grayscale’s flagship Grayscale Bitcoin Trust (GBTC) is the world’s largest bitcoin fund, one that the company hopes will someday be converted into an exchange-traded fund.
GBTC has not traded at a premium relative to the price of bitcoin, its underlying asset, since early 2021. DCG embarked on an effort to reduce the discount in 2021, announcing a plan to spend up to $1 billion to purchase GBTC shares.
Troubles at Genesis’ lending business had no impact on DCG and its subsidiaries, DCG said in November, while Grayscale said its underlying assets were unaffected.
OTHER VENTURE CAPITAL INVESTMENTS
DCG is a prolific venture capital investor, listing more than 160 companies in its portfolio on its website, of which it has acquired 28, it says. Crypto exchange Luno and crypto mining and staking firm Foundry are listed as subsidiaries.
DCG is also an investor in U.S. crypto exchanges Coinbase and Kraken, and its other holdings include the U.S. firm Circle, which runs the stablecoin USDC, and blockchain analytics companies Chainalysis, Dune Analytics, Elliptic and Etherscan.
(Reporting by Elizabeth Howcroft in London and Hannah Lang in Washington; Editing by Lananh Nguyen and Matthew Lewis)