Author: DCG CEO Barry Silbert
Compilation of the original text: Wu said Real
Dear shareholders, there has been a lot of noise in the past week, and I would like to communicate directly with you to clarify our DCG position.
Most of you know what's going on with Genesis, but here's a quick recap: Genesis Global Capital's lending business suspended redemptions and new loan originations last Wednesday (November 16) after market turmoil sparked unprecedented withdrawal requests. This is a liquidity and duration mismatch on the Genesis loan book. Importantly, these issues do not affect Genesis' spot and derivatives trading or custody operations, which will continue to operate as usual. Genesis' leadership and board of directors have decided to hire financial and legal advisors, and the company is exploring all possible options in response to the FTX debacle.
Rumors have swirled in recent days about an intercompany loan between Genesis Global Capital and DCG. For those unaware, in the normal course of business, DCG borrowed from Genesis Global Capital in the same way that hundreds of cryptocurrency investment firms borrow. These loans are always structured on an arm's length basis and priced at prevailing market rates. DCG currently has approximately $575 million in debt to Genesis Global Capital, which is due in May 2023. The loans were used to fund investment opportunities and to repurchase DCG stock from non-employee shareholders, transactions highlighted in the quarterly shareholder update. To this day, I have never sold my DCG stock.
As you may recall, there is a $1.1 billion promissory note due in June 2032. As stated in our last shareholder letter in August 2022, DCG stepped in and assumed some of Genesis' liability in relation to 3 AC's default. As stated in August, as these are now DCG's liabilities, DCG is participating in 3 AC's liquidation proceedings before the creditors' committee and is pursuing all available remedies for the benefit of creditors to recover the assets. Aside from a Genesis Global Capital intercompany loan and a long-term promissory note due in May 2023, DCG's only debt is a $350 million credit facility from a small group of creditors led by Eldridge.
Let's put it this way: DCG will continue to be a leading builder in the industry, committed to our long-term mission of accelerating the development of a better financial system. We have weathered previous secret winters, and while this one may feel harsher, we will come out of it stronger together. DCG has only raised $25 million in junior capital, and we're on track to hit $800 million in revenue this year.
Ten years ago, in 2012, I bought my first bitcoin and decided to invest in this industry for a long time. In 2013, we launched Genesis, the first bitcoin trading firm, and the first bitcoin fund, which later grew into Grayscale, now the world's largest digital currency asset manager. Foundry operates the world's largest Bitcoin mining pool and is building the decentralized infrastructure of the future. CoinDesk is the industry's premier media, data, and events company, and they've done amazing coverage this crypto winter. Luno is one of the most popular crypto wallets in the world and an industry leader in emerging markets. tradedeblock is building a seamless institutional trading platform, and HQ, its latest subsidiary, is building a life and wealth management platform for digital asset entrepreneurs. These subsidiaries are separate businesses, managed independently and operating as usual. Finally, with over 200 companies and funds in our portfolio, we are often the first choice for the best founders in the industry.
We appreciate your encouragement and support, as well as your interest in investing in DCG. If we decide to do a funding round, we will let you know.
Original link
