(Kitco News) - Thursday brought new revelations about the dire state of embattled crypto lender Genesis as the Financial Times reported that the firm owes its creditors more than $3 billion. This massive debt hole has prompted its owner, venture capital conglomerate Digital Currency Group, to mull selling some of its portfolio to raise money.
DCG’s portfolio of holdings – reportedly worth around $500 million – is comprised of 200 crypto-related projects including banks, exchanges and custodians operating in more than 35 countries.
Needless to say, a $3 billion debt hole for Genesis, while DCGs assets are worth $500 million, highlights the precarious nature of the situation and the difficult fundraising task that lay ahead for the venture capital firm. So far, DCG has struggled to find outside funding amid the carnage left in the wake of FTX declaring bankruptcy.
The FTX bankruptcy is at the center of the struggles for Genesis as the crypto lender was highly exposed to the exchange when it collapsed in early November.
The ongoing public spat between Gemini co-founder Cameron Winklevoss and DCG CEO Barry Silbert focuses on the fact that DCG issued a $1.1 billion promissory note to Genesis in an effort to shoulder the burden of the lender's losses from its exposure to FTX. Genesis owes $900 million to Gemini after the exchange deposited funds from its lending program Earn with the platform.
Winklevoss has posted several open letters on Twitter to bring the matter into the public forum, but so far Silbert has remained silent about trying to find a solution to the money owed to Gemini.
Winklevoss has accused Silbert and Genesis of making “false statements and misrepresentations” about Genesis’s solvency and financial health, saying those statements harmed the 340,000 users of Earn, which the exchange was forced to close this week. The Gemini co-founder called on the board of DCG to remove Silbert from his position as CEO.
On Tuesday, Silbert wrote a letter to DCG shareholders providing a review of the facts and developments with DCG and Genesis in an attempt to assuage investors' concerns. In an effort to cut costs, Genesis is cutting 30 percent of its workforce and has shuttered its wealth management business HQ.
The lender has hired investment bank Moelis to help explore its options but has yet to find any meaningful outside funding sources. Some of the other creditors who are owed money by Genesis include €280mn to the Dutch exchange Bitvavo and funds to customers of crypto sayings company Donut.
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One issue with DCG's attempt to raise capital is the fact that many of its investments are illiquid and will likely take some time to sell, especially amid a crypto winter where companies across the ecosystem are looking to cut costs. Selling in these market conditions is also likely to result in a further decline in the price of certain assets, highlighting just how difficult a task DCG has ahead of it.
Some of the big names in DCGs portfolio include Coinbase, Kraken, Circle, The Graph, Ripple, Silvergate, Paradigm, Lightning Network, Fireblocks, eToro, Dune Analytics, Decentraland, Dapper Labs, Chainalysis, Avanti Bank and Abra.
