DCG closes asset management division at end of month
US crypto asset (virtual currency) conglomerate Digital Currency Group (DCG) has decided to close its asset management division. The Information and others reported on the 5th.
A DCG spokesperson said:
Due to the macroeconomic environment and the prolonged downturn in the cryptocurrency industry, we have decided to close our asset management division effective January 31, 2023.
According to The Information, DCG’s asset management division manages assets for entrepreneurs and investors, managing about 460 billion yen ($3.5 billion) as of December. The decision to close is said to come as a surprise to users of asset management services.
Indebtedness to Gemini
DCG is being called out for debt repayment by major cryptocurrency exchange Gemini. Gemini’s co-founder says DCG owes Gemini “approximately ¥120 billion ($900 million)” and wants it to negotiate to repay the money.
As a background, due to the bankruptcy of FTX, Genesis, a DCG subsidiary virtual currency broker, has suspended withdrawals. Gemini’s yield service, which is said to have used Genesis’ loan function, has also suspended the redemption of user funds.
Gemini also criticized that DCG borrowed about 220 billion yen from its subsidiary Genesis in intercompany loans and used it for stock buybacks and low-liquidity venture investments.
In addition, DCG CEO Silbert denied the face value, saying that he did not borrow 220 billion yen. He also pointed out that the next maturity date is May 2023, which is still a long way off.
association: Gemini founder criticizes DCG, seeks repayment of customer funds of 120 billion yen
DCG is a holding company of major cryptocurrency companies established in 2015. It functions as the parent company of Grayscale, CoinDesk, Genesis, etc., and as of April 2022, its affiliated companies had a cumulative total of over 1,000 employees.
Its troubled subsidiary, Genesis, has undergone two rounds of restructuring, cutting its workforce from 260 to 145. The Wall Street Journal is reportedly considering a bankruptcy filing by Chapter Eleven as a possibility.
Chapter 11 of the U.S. Bankruptcy Code (Chapter 11)
A reconstruction-type bankruptcy legal system similar to the Civil Rehabilitation Law of Japan. The company will be restructured by reducing debts while continuing to operate. Debt collection will be suspended after the application, and the debtor will work on debt consolidation and formulate a reconstruction plan within 120 days in principle.
Is liquidity a problem?
According to Dutch cryptocurrency exchange Bitvavo, DCG appears to have liquidity problems.
Bitvavo used DCG’s services to provide users with an off-chain staking service, but the redemption from DCG to Bitvavo has now been suspended. DCG is currently experiencing “liquidity issues due to volatility in the cryptocurrency market,” and is suspending the redemption of funds until this is resolved.
DCG plans to present a plan in the coming weeks to return outstanding balances. Bitvavo also said that users of the exchange will not be affected by DCG liquidity issues, as Bitvavo itself allows customers to process withdrawals of their assets at any time.