Details of Indebtedness to Genesis
Barry Silbert, CEO of the digital currency group (DCG), a crypto asset (virtual currency) conglomerate, issued an investor letter on the 10th. He explained the matters that are currently attracting attention, such as inter-company loans with subsidiary Genesis.
Silbert said last year was “the most difficult year of my life, personally and professionally,” following a series of cryptocurrency bankruptcies. He said he is taking steps to ensure long-term success, including cutting operating costs, headcount and closing the wealth management subsidiary HQ.
On top of that, the current business situation is presented in a Q&A format.
Silbert clarified the amount of assets owed by Genesis, a lending unit. DCG currently borrows “approximately ¥60 billion (approximately $450 million) and 4,550 BTC (equivalent to approximately ¥10 billion ($78 million)” from Genesis, which it says will mature in May 2023. .
The US dollar was borrowed at an interest rate of 10-12%, and Bitcoin (BTC) was borrowed at a weighted average interest rate of 3.85%, leaving a loan balance of 4,550 BTC.
Subsidiary Genesis has suspended redemption and withdrawal services since November due to the FTX bankruptcy. The company’s derivatives division revealed that approximately 24 billion yen worth of funds were tied up in FTX accounts.
Genesis has cut its headcount by 30% since its woes and is reportedly lining up to file for bankruptcy.
Gemini, a major cryptocurrency exchange that is said to have used Genesis’ yield program, has also been forced to withdraw from the yield account “Earn” due to this effect.
Gemini co-founder Cameron Winklevoss sent a letter to Silbert asking him to negotiate a refund of Gemini’s customer funds. It also accused DCG of using assets borrowed from Genesis to buy back its own shares and invest in illiquid ventures.
Relation: Gemini founder criticizes DCG, seeks repayment of customer funds of 120 billion yen
Use of funds
In the letter, Silbert also explained how the money borrowed from Genesis will be used.
DCG initially held the US dollars it borrowed as cash to be used when the opportunity arose. and invested it in “liquid tokens and public equities.”
In addition, Bitcoin was used to hedge a long position in the GBTC bitcoin investment trust of its subsidiary Grayscale, maintaining the market neutrality of the position.
In addition, this public market GBTC purchase is based on a risk-weighted return assessment, complies with securities rules and is transparently disclosed in filings and press releases. I added that.
What is GBTC (Grayscale Bitcoin Investment Trust)?
GBTC is an investment trust linked to the price of Bitcoin and can be traded like ordinary stocks. It is offered to institutional investors and accredited investors recognized by the U.S. Securities and Exchange Commission (SEC), and has the advantage that investors do not need to buy, sell or hold actual Bitcoins.
Silbert also addressed DCG’s mandate in restructuring Genesis. As one of its external advisors, he says he advises Genesis. However, DCG executives do not have decision-making power over the restructuring of Genesis because they have an outstanding loan balance against Genesis.
In addition, there were reports that US federal prosecutors were investigating DCG’s business-to-business loans, but he said, “I was not aware of such an investigation and was not aware that it was being investigated. I have no reason to believe it,” he denies.
Relation: US federal prosecutors investigate financial transactions between DCG and Genesis = report