(Kitco News) -
Digital Currency Group (DCG), Barry Silbert’s massive crypto consortium, saw two major setbacks for its subsidiaries on Thursday, announcing that embattled crypto lender Genesis would lay off an additional 30% of their staff, while its HQ wealth management division would be shutting down altogether.
According to an internal memo first obtained by The Information, DCG decided to close their HQ wealth management business, which operated for only one year and had $3.5 billion in assets under management.
“Due 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 spokesperson for DCG wrote in an emailed statement on Thursday. “We’re proud of the work that the team has done and look forward to potentially revisiting the project in the future.”
According to the DCG website, HQ was “the life and wealth management membership platform for digital asset entrepreneurs and investors.”
And earlier on Thursday afternoon, DCG’s crypto lending platform Genesis Global Trading announced an additional 60 layoffs representing 30% of their remaining staff. This is the second round of employee reductions at Genesis in six months after the company cut its workforce by 20% in August.
In an update to its clients on Jan. 4, Genesis interim CEO Derar Islim said they “remain focused on finding a solution for our borrowing and lending intermediation business,” and that a part of that process included “reducing costs and driving efficiencies” across all their business activities.
DCG and Genesis have come under increasing pressure this week after Gemini co-founder Cameron Winklevoss published an open letter to DCG founder Barry Silbert on Jan. 2.
Winklevoss wrote that DCG owes its own subsidiary Genesis Trading $1.675 billion, which includes money that belongs to Gemini and other creditors, and demanded that Silbert to “publicly commit” to a resolution timeline by Jan. 8, 2023.
Silbert tweeted a response to the open letter, saying “DCG did not borrow $1.675 billion from Genesis. DCG has never missed an interest payment to Genesis and is current on all loans outstanding,” and claimed DCG delivered a proposal of their own to Gemini on Dec. 29 “and has not received any response.”
“So how does DCG owe Genesis $1.675 billion if it didn't borrow the money?” Winklevoss replied. “Oh right, that promissory note... Will you, or will you not, commit to solving this by January 8th in a manner that treats the $1.1 billion promissory note as $1.1 billion?”
The public argument drew the attention of another major player in crypto’s recent crises. Zhu Su, co-founder of Three Arrows Capital (3AC), a Singapore-based cryptocurrency hedge fund which went bankrupt in June 2022. Zhu leveled his own accusations at Silbert and DCG, saying they “conspired w FTX to attack Luna,” lost a substantial amount when 3AC went bust and “fabricated a left pocket right pocket callable promissory note” to cover up the losses.
Zhu said that Silbert, “like FTX, proceeded to misdirect for months” and “like FTX, spent six months taking more deposits while insolvent” in the hopes that the market would recover and make back their losses.
“dcg value is 0, criminal fraud,” Zhu wrote. “Genesis creditors will push it into bankruptcy and take remaining dcg assets in coming days.”
Zhu’s strong statements on twitter made waves across the crypto community, but they also prompted the U.S. Bankruptcy Court in the Southern District of New York to take to the platform to issue subpoenas for Zhu and 3AC cofounder Kyle Davies on Thursday.
The subpoenas, which require the founders to “produce documents, information, or objects or to permit inspection of premises in a bankruptcy case,” were issued after 3AC liquidators were granted permission from authorities in both Singapore and the United States.
The Genesis layoffs and HQ shutdown contributed to the downward pressure on the funds of DCG subsidiary Grayscale, with the Grayscale Bitcoin Trust (GBTC) discounted by over 45% and trading at $8.30 at the time of writing.
