The Digital Currency Group (DCG) has reported losses worth $1 billion in 2022 in the aftermath of the collapse of Three Arrows Capital (3AC). DCG recently released the investor report for Q4 2022, where it reported losses worth $1.1 billion as a direct result of the collapse of the crypto hedge fund. DCG is the parent company of the crypto lending firm Genesis, which filed for Chapter 11 bankruptcy in January 2023.
The firm is reportedly 3AC’s largest creditor, owing the now-bankrupt hedge fund around $2.36 billion in funds. DCG also reportedly had to halt its quarterly dividend payments in an effort to conserve cash and improve its balance sheet. DCG declared a valuation of over $10 billion on Nov. 1, 2021, following the sale of $700 million worth of shares to companies such as Alphabet Inc. However, its equity valuation came in at $2.2 billion with a price per share of $27.93, reflecting the sector’s 75%-85% decline in equity values.
The restructuring of Genesis, however, was described as a milestone. The plan would bring all Genesis entities under the same holding company, with DCG contributing its equity share in Genesis’ trading entity and selling its trading entity. DCG would exchange its existing $1.1 billion promissory note due in 2032 for convertible preferred stock and refinance its existing 2023 term loans, worth $526 million.
The Genesis restructuring plan would provide creditors with a recovery rate of around $0.80 per dollar deposited, with a path to $1.00, according to a Genesis creditor. DCG’s remaining assets were held by its asset management subsidiary Grayscale and its Bitcoin mining business Foundry Digital. DCG’s cash and liquid holdings were $262 million, and its investments amounted to $670 million.
In February, DCG proposed an agreement that would see its equity share in Genesis’ trading entity contributed and all Genesis entities brought under the same holding company, with its trading entity sold off. DCG would also exchange an existing $1.1 billion promissory note due in 2032 for convertible preferred stock, and its existing 2023 term loans with an aggregate value of $526 million would be refinanced and made payable to creditors.
According to a Genesis creditor, the plan “has a recovery rate of approximately $0.80 per dollar deposited, with a path to $1.00” for those owed money by the firm. DCG declared on November 1, 2021, that its valuation was more than $10 billion, following the sale of $700 million worth of shares to companies like Alphabet Inc., Google’s parent company. However, the recent losses have brought its valuation down significantly.
