With the recent fallout from FTX’s fall from grace, another cryptocurrency entity finds itself under scrutiny – and the spotlight is now uncomfortably focused on its notoriously reticent founder and whether or not the company even has a future.
Industry watchers are pointing out a recent spate of suspended withdrawals from Genesis, a cryptocurrency exchange that is part of tech exec Barry Silbert’s Digital Currency Group (DCG), as a sign that this company may be the next digital assets domino to fall.
Genesis in Question
Genesis is considered the heart of Silbert’s crypto empire. Known as one of the largest digital asset brokerage firms, it enabled funds and market professionals to amplify their trades by loaning them additional funds in dollars or any number of cryptocurrencies.
But now, the financial health of the exchange has been called into question following recent news that DCG owes its subsidiary a whopping $1.1 billion based on a previously undisclosed promissory note that was hidden from a number of potential investors.
Andrew Parish, founder of crypto apps developer ArchPublic, opines that a cache of hidden funds is the reason behind DCG and Genesis’ recent funding round which sought to raise $1 billion. However, both Silbert entities were rebuffed by investors.
Parish added that another DCG company, the Grayscale Bitcoin Trust, is practically the only one that’s getting any positive interest from investors. He also warned that, if Genesis falls, DCG will collapse along with it.
Before the recent spate of issues in the cryptocurrency scene, DCG was seen as a pioneer and a titan in the industry. Over the past several years, its founder and his associates diversified its portfolio to include a number of exchanges, hardware manufacturers, and even the crypto-centric bank Silvergate.
But Genesis’ involvement with Three Arrows Capital may have sent it – and DCG – on a downward spiral. When the hedge fund company filed for bankruptcy, Genesis was its biggest creditor. As a result, DCG assumed several liabilities and subsequently filed a claim suit worth $1.2 billion against Three Arrows.
Last month, Genesis also disclosed that business for its lending arm, Genesis Global Capital, plunged by 80% at the end of Q2-2022. This prompted the company to suspend redemptions and new loan originations. Genesis was quick to assure the public, however, that only its lending arm was affected and that its trading and custody businesses remained sound.