DCG and Genesis loans under scrutiny

The precedents between FTX and Alameda Research make it necessary to monitor these types of loans, while the CEO of DCG tries to calm the waters

Negocios November 24
Víctor de Castro

The solvency issues that led to the fall of one of the most important exchanges, FTX, have led to greater surveillance of crypto companies. Lending problems between the cryptocurrency exchange and its sister company, Alameda Research, led the accounting of both companies to have gaps. With these precedents, it is only natural that other similar cases be examined with a magnifying glass.

One of these cases is the relationship between Digital Currency Group and one of the companies under its charge, Genesis Global Capital. The crypto lender froze withdrawals on its platform due to the aftermath caused by FTX, which dragged down Genesis. Between DCG and its subsidiary, two loans substantial loans have come to light, which has led the community to suspect a certain similarity with the Alameda Research and FTX case.

The CEO of Digital Currency Group, Barry Silvert, has spoken out regarding these issues to try to calm users' spirits. The businessman announced that his company owes Genesis $575 million for a loan. In addition, he also owes a promissory note to his subsidiary worth $1.1 billion. The first will mature in May 2023, while the promissory note matures in June of that same year.

According to Silbert, these loans were arm's length transactions at market prices. The $575 million note is seen to have been used to finance investments, while the $1.1 billion note was apparently issued after DCG took over Genesis's exposure to the default of the Three Arrows Capital fund, which collapsed due to the May market crash triggered by the LUNA and UST tokens.

Genesis started to struggle once the problems began on FTX. The crypto lender has $175 million locked up on the exchange. According to information, Genesis is working to source a billion dollars through investors, in order to overcome the liquidity crisis that is suffering. If this capital did not materialize, it could resort to suspending the bailouts. For this reason, Genesis has hired the investment bank Moelis & Co, with the aim of reinforcing the liquidity of its crypto loan business, as well as solving the needs of its clients.

Can this whole situation cripple DCG? Digital Currency Group is one of the most important investment companies in the crypto sector, which would be a new blow to the ecosystem. If Genesis can't find the billion dollars it's looking for, it could spell serious trouble for the parent company. And the cryptocurrency market is not in a position to receive more harsh punishment.


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