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What a Genesis bankruptcy would mean for DCG

Jan 19, 2023
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Illustration: Shoshana Gordon/Axios

A Genesis bankruptcy could deepen the crypto contagion and would lead to a cascade of pain for the crypto lender's parent company, Digital Currency Group.

Why it matters: If Genesis were to go bankrupt, DCG could be on the hook for much of the fallout, including a $350 million loan repayment to Eldridge, per the Financial Times.

Of note: DCG founder Barry Silbert has reportedly offered up a stake in DCG to Genesis creditors as part of a bankruptcy plan, per the Block — a move that would probably dilute DCG shareholders. Several news outlets have reported on the company's Chapter 11 preparations.

  • Already, DCG has suspended dividends to shareholders, which include SoftBank’s Vision Fund II, CapitalG, Ribbit Capital, GIC, Tribe Capital, and Emory University.

The big picture: The ties between Genesis and the rest of the DCG empire — once touted as a DCG strength — has become a source of pain.

  • DCG itself put $340 million in equity into Genesis in November as FTX began to fall apart. (Genesis' derivatives business has $175 million locked up in FTX.)
  • DCG's crypto exchange Luno, which partnered with Genesis for its Savings Wallet, shuttered the product in December.

What they're saying: DCG declined to comment on the reports of a bankruptcy filing, but a spokesperson noted that DCG's 2022 revenue was on track to reach $800 million.

The bottom line: Silbert has sought to distance DCG from Genesis in a recent letter to shareholders, saying its subsidiaries operate "as independent companies with their own management teams."

Meanwhile: The crypto news arm of DCG has put up a "For Sale" sign. CoinDesk, the respected crypto news site, has hired Lazard to seek buyers.

  • "My goal in hiring Lazard is to explore various options to attract growth capital to the CoinDesk business, which may include a partial or full sale," CoinDesk CEO Kevin Worth said in an emailed statement to Axios.
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