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The contagion of the FTX collapse has spread to some of the biggest players in the crypto space such as the Digital Currency Group (DCG). On Tuesday, November 22, sources familiar with the matter told the New York Times that Genesis Global Capital has hired investment bank Moelis & Company to explore different options including bankruptcy.
The report adds that there aren’t any financial decisions made yet and that Genesis can still look to avoid bankruptcy. As per the previous reports, Genesis Global is looking to raise $1 billion in funds with a deadline of Wednesday. Another option proposed by industry experts is Reg M for Grayscale’s Trust.
In the FTX accounts, the derivatives unit of Genesis Global has more than $175 million locked. Thus, all eyes are now on the parent company Digital Currency Group (DCG), and whether it can help Genesis with its liquidity requirement. Some sources familiar with the matter also stated that Genesis has lowered the ask of fundraising to $500 million. In a note to investors on Tuesday, DCG founder and CEO Barry Silbert spoke about the current situation. He noted:
In recent days, there has been chatter about intercompany loans between Genesis Global Capital and DCG.  For those unaware, in the ordinary course of business, DCG has borrowed money from Genesis Global Capital in the same vein as hundreds of crypto investment firms.  These loans were always structured on an arm’s length basis and priced at prevailing market interest rates.
Barry Silbert further disclosed adding that DCG has a liability of $575 million to Genesis Global due May 2023. He added that DCG used this loan amount to fund different investment opportunities and repurchase the DCG stock from non-employee shareholders in the secondary market.
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Furthermore, Silbert reminded investors that there’s a $1.1 billion promissory note due June 2023, that DCG owes Genesis related to the liabilities from the default of Three Arrows Capital. However, Silbert remains confident that DCG can come out stronger from the current mess. He noted:
DCG will continue to be a leading builder of the industry and we are committed to our long-term mission of accelerating the development of a better financial system. We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger.
Amid the current liquidity crunch and the mismatch in the loan book, Genesis Global leadership and their board decided to hire legal and financial advisors. The firm is exploring different possible options as of now. “Our goal is to resolve the current situation without the need for filing a bankruptcy,” a Genesis spokesman told the New York Times.
Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.
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