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DCG announces shutdown of TradeBlock institutional brokerage unit

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(Kitco News) - Digital Currency Group (DCG) will shut down its TradeBlock institutional brokerage subsidiary on May 31 in the latest setback for Barry Silbert’s embattled crypto conglomerate.

“Due to the state of the broader economy and prolonged crypto winter, along with the challenging regulatory environment for digital assets in the US, we made the decision to sunset the institutional trading platform side of the business,” a DCG spokesperson told Bloomberg.

DCG media subsidiary CoinDesk announced the purchase of TradeBlock on January 5, 2021, the day before the total cryptocurrency market cap broke through $1 trillion.

“We are combining the network effect of CoinDesk’s growing global audience and its reputation as the preeminent crypto and blockchain media company with TradeBlock’s world-class prices, indexes and trading tools,” CoinDesk CEO Kevin Worth said at the time. “Now we can bring trusted, reliable data and information to this booming market.”

CoinDesk absorbed the company’s asset indexing business, and the brokerage operations were kept within the TradeBlock platform. The purchase price and other terms of the deal were not disclosed.

Digital Currency Group has been beset with legal and financial problems since the collapse of FTX in November unleashed a chain reaction of massive investment losses, declining company valuations and collapsing asset prices across the cryptocurrency ecosystem.

On May 19, Gemini claimed that DCG had missed a scheduled payment under the terms of their agreement stemming from the bankruptcy of DCG’s Genesis lending platform, which declared bankruptcy in January.

"Digital Currency Group, Inc. (DCG), the parent company of Genesis Global Capital, LLC (Genesis) did not pay the approximately $630 million that came due last week," the update from Gemini said. "Genesis, the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG), and Gemini are considering whether to provide a forbearance to DCG to avoid a DCG default."

Under forbearance, lenders grant borrowers a temporary reduction or pause in payments to help them get their financial matters in order. Eventually, the borrower must repay all reduced or missed payments. To prepare for this possibility, Genesis filed a motion on Friday with the Bankruptcy Court seeking to extend its period of exclusivity to propose such a plan.

A spokesperson for Genesis told Kitco Crypto that they “are working collaboratively to address Digital Currency Group’s nonpayment of approximately $627 million in dollars and BTC that was due” and that the parties “are discussing potential terms of forbearance, a standalone chapter 11 plan for Genesis and other options to recover assets and maximize value to stakeholders.”

On Jan. 5, 2023, two years to the day after acquiring TradeBlock, DCG announced that they would be closing their HQ wealth management business, which had operated for only one year and had $3.5 billion in assets under management.

“Due to the state of the broader economic environment and prolonged crypto winter presenting significant headwinds to the industry, we made the decision to wind down HQ, effective January 31,” a DCG spokesperson wrote at the time. According to the DCG website, HQ was “the life and wealth management membership platform for digital asset entrepreneurs and investors.”

Then on Jan. 23, a class action lawsuit was filed against DCG and Silbert alleging violations of federal securities laws. The class period is from Feb. 2, 2021, when Genesis and Gemini began offering the Gemini Earn program to retail investors, and Nov. 16, 2022, the day Genesis halted loan redemptions, effectively freezing the assets of Earn participants and other customers.

The lawsuit alleges that Genesis “engaged in an unregistered securities offering in violation of Section 5 of the Securities Act” when they entered into lending agreements that “fit the definition of securities” under the law.

The complaint also alleges securities fraud, claiming Genesis engaged in “a scheme to defraud prospective and current digital asset lenders by making false and misleading statement that intentionally misrepresented the financial condition of Genesis Global Capital” in order to maintain the flow of new digital assets to Genesis and to keep existing clients from pulling their assets out of the firm.

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