Compilation of the original text: Mary Liu, Bitui BitpushNews
Compilation of the original text: Mary Liu, Bitui BitpushNews
Digital Currency Group (DCG) CEO Barry Silbert has worked in the traditional financial market for many years. After moving to the encryption field, he successfully created his DCG empire and is now working hard to save his brokerage company from bankruptcy.
A year ago, Barry Silbert's 40 percent stake in DCG was worth more than $3 billion. DCG, a crypto conglomerate with tentacles in virtually every corner of the industry, from lending to bitcoin mining, has a lavish Connecticut office with a marble kitchen, barista and French chef.
Silbert, a 46-year-old finance veteran who began his career helping companies restructure and navigate economic downturns, unlike many crypto executives, tweeted about the risky behavior he saw in digital assets warning, implying that he anticipated possible problems.
Today, Silbert is trying to keep DCG's lending company out of bankruptcy. Other DCG businesses, such as fund manager Grayscale Investments, bitcoin mining firm Foundry and media outlet CoinDesk, also face major challenges.
If the collapse of crypto exchanges FTX and Sam Bankman-Fried (SBF) was due to inexperience and fraud, then the crisis of Silbert Company is the most common mistake of overly optimistic financiers, including growing too fast and doing business with the wrong people. business and borrowing on a large scale, even in the case of DCG, from subsidiaries.
Silbert has built his own company following Buffett's model, with investors or advisors including former U.S. Treasury Secretary Larry Summers, Silver Lake co-founder Glenn Hutchins and Bain Capital Ventures. Even so, DCG is saddled with debt to expand.
Mike Alfred, founder of Digital Assets Data, which was once part of DCG's venture capital portfolio, said: "The organization has become so large that its success seems to imply failure, and Silbert is no longer able to personally participate in the risk management of each subsidiary."
Among the tough problems Silbert is working on now are:
DCG Lending Company Genesis
The U.S. Securities and Exchange Commission (SEC) has sued Genesis and cryptocurrency exchange Gemini Trust Co. LLC, alleging that the two companies’ programs to provide investors with the opportunity to earn above-market returns in the cryptocurrency space violated investor protections Law
Grayscale Bitcoin Trust (GBTC) Value
Valuations for DCG's venture capital and its mining, media and other businesses also fell sharply amid a sharp market downturn
"The past year has been the most difficult of my life," Silbert wrote to shareholders on Jan. 10.
In an interview, he expressed his belief that the crypto industry will bounce back, and so will DCG: “There is no doubt about our survival, we have a great business, great investments, and a great team.”
Silbert said that much of Genesis's troubles are due to the unexpected collapse of FTX and a large hedge fund client, as well as the collapse of cryptocurrency prices. The company team is trying to find a solution, and other DCG subsidiaries and investments will become powerful entities.
Silbert has successfully weathered economic downturns before. People who have worked with him said that if the crypto market stabilizes, many of DCG's businesses can remain profitable and have good prospects.
Was an investment banker for Houlihan Lokey
He said he bought bitcoin when it was trading below $10, recently just above $21,000, and peaked at more than $68,990 in 2021. As it rose, he invested hundreds of thousands of dollars of his personal funds in crypto infrastructure projects.
“I’m excited about the potential of a borderless, frictionless form of digital money, and I’m not going to stop preaching about Bitcoin,” he said in 2012, persuading the SecondMarket board to create what would become the Grayscale Bitcoin Trust.
After SecondMarket was sold to Nasdaq
According to people familiar with the matter, there is little opposition from DCG executives to the rapid growth, nor from investors, advisors or financial titans who sit on its board. Of those, Hutchins and Summers have cut ties with DCG in recent months, and representatives for both, as well as Bain, declined to comment.
Unlike some entrepreneurs in the crypto space who make media appearances or make bold predictions about Liren, Silbert generally avoids public speaking. People who have worked with him say he doesn't like small talk and has three computer screens running Twitter and CNBC on his desk. His wife once confided to a colleague that while on vacation, Silbert often lugged stacks of books to the hotel pool.
Silbert made it clear to employees that DCG would not go public. As cryptocurrency prices soared and some in the industry made flashy acquisitions, he told colleagues they were accumulating "generational wealth" and urged them not to show off.
A former colleague said Silbert told them: "Don't try to be a target." A DCG spokeswoman said Silbert did not recall saying anything similar.
Around 2020, Silbert decided to move most of his business from lower Manhattan to Stamford, Connecticut, where he lives. DCG spent $50 million renovating an office there, hoping to attract younger workers, such as installing a flashy kitchen where chefs can prepare lunches, such as grilled octopus, which Silbert usually brings to work.
Genesis is based in New York, and the 2021 Christmas party will be held at Cipriani restaurant, with a full orchestra, DJ, large snack bar, game consoles and a champagne tower. Silbert himself did not attend the party.
According to people close to Silbert, Mr Silbert dislikes managing employees. Instead, he focused on allocating funds and handing day-to-day decisions to the management of each division.
In June 2021, with cryptocurrencies still going strong, Silbert tweeted: "There is a daisy chain of borrowers and lenders in the crypto space - most well capitalized but some undercapitalized...Understand the chain The counterparty risk in the link and where the weak ones matter.”
Still, at the start of 2022, DCG has borrowed nearly $500 million from its own Genesis lending firm to invest in stocks and digital tokens, in addition to the thousands of bitcoins it has borrowed from Genesis in 2021 and 2022. Buy back stock from investors.
At the time, DCG was valued at $10 billion and had annual cash flow of more than $1 billion, which justified the borrowing for Silbert and the team, the company said.
Genesis provided a substantial loan to Three Arrows Capital Ltd, a Singapore-based hedge fund betting on the cryptocurrency TerraUSD. Last year, Genesis lent $2.4 billion to Three Arrows. Eighty percent of the credit is collateralized in bitcoin, ethereum, Grayscale Bitcoin Trust, Grayscale Ethereum Trust and other illiquid cryptocurrencies, according to court documents and people familiar with the matter.
TerraUSD plummeted in May, Three Arrows collapsed, and Genesis suffered huge losses as the value of its loan collateral plummeted.
DCG absorbed Genesis' debt and filed a $1.2 billion claim against Three Arrows. Three Arrows' founders declined to comment.
The FTX debacle in November compounded Genesis' troubles. Genesis has lent hundreds of millions of dollars to Alameda Research, a sister trading firm of the crypto exchange, the Wall Street Journal reported. Genesis said on Nov. 10 that its derivatives and trading business has about $175 million in "locked funds" in its FTX trading account.
Late last year, Silbert began negotiations to save Genesis and revive DCG, which provided Genesis with a $1.1 billion promissory note after Three Arrows defaulted.
Genesis creditor Gemini Trust, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss, has pressured Genesis to return more than $900 million in Gemini customer deposits. On Twitter, Cameron Winklevoss posted an open letter accusing Silbert of "malicious delay tactics."
"This is yet another desperate, unconstructive publicity stunt," a DCG spokesman said. DCG "will continue to engage in productive dialogue with Genesis and its creditors with the goal of finding a resolution that works for all parties."
In a lawsuit filed by the SEC against Genesis and Gemini on Thursday, the regulator said Genesis should register its crypto lending product, which would require it to provide customers with detailed financial disclosures. Spokespeople for Genesis and DCG declined to comment on the lawsuit.
Tyler Winklevoss tweeted that Gemini Trust had been in discussions with the SEC for more than 17 months, but the agency never raised the possibility of enforcement action before Genesis suspended withdrawals, and the SEC did not respond to a request for comment.
In December, New York hedge fund Fir Tree Partners sued Grayscale Investments in Delaware Chancery Court, seeking details to investigate Fir Tree's allegations of mismanagement and potential conflicts of interest. A group of minority shareholders is trying to force fee cuts, management reshuffles and other changes.
"After 10 years of devoting myself to this company and this space, with a relentless focus on doing things the right way, my integrity and good faith are being called into question," Silbert said in his letter to shareholders. It's always been a challenge."
A Grayscale spokeswoman called the lawsuit baseless and said: "We look forward to clarifying the numerous mischaracterizations about our company and our products."
Grayscale Bitcoin Trust collected $615 million in investor fees in 2021, according to the latest regulatory filing. Analysts say it remains a lucrative business. But the crypto sell-off means all of DCG's holdings may be worth a fraction of what they were a year ago. About two weeks ago, DCG closed the headquarters of its wealth management business to cut costs.
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