Cryptocurrency group Digital Currency Group (DCG) said it had stopped paying its dividend and told shareholders it was focusing on strengthening its balance sheet by cutting costs in response to the fallout from the FTX crash, which itself was driven by one of its divisions.
DCG came under intense scrutiny as the FTX debacle exposed major breaches in Barry Silbert's empire. The venture capital firm has subsidiaries including Grayscale, the world's largest digital asset manager, Genesis, an institutional lender, and Foundry, a consultancy.
Due to financial difficulties, Genesis was forced to suspend new loan originations and redemptions - a move that directly affected the Gemini Earn program. This then escalated a fight with cryptocurrency exchange co-founder Cameron Winklevoss, who accused DCG of misrepresentation and accounting fraud and called for Silbert to step down. It was earlier reported that Genesis owed $900 million to users of Winklevoss' high-yield savings product Gemini Earn. DCG and Gemini earlier assured investors that the companies have been working hard to find a solution.
While the fate of client funds stuck in the Gemini Earn program continued to hang in the balance, sway between the two executives led Gemini to terminate its master loan agreement with Genesis, thereby “officially” halting the program. The move requires Genesis to return outstanding assets.
In total, Genesis is currently saddled with a staggering $3 billion in debt, and in order to pay off some of that debt, DCG is looking to sell off the cryptocurrency brokerage’s venture capital portfolio. So Moelis, a New York-based global investment bank, was hired to explore some solutions to Genesis' debt crisis. However, discussions about injecting new funds into cryptocurrency lenders appear to have been put on hold.
