Cryptocurrency venture capital firm Digital Currency Group (DCG) reported losses of over $1 billion in 2022 due to the collapse of Three Arrows Capital (3AC), a crypto hedge fund. DCG’s Q4 2022 investor report revealed a loss of $1.1 billion for the year, with the impact of the Three Arrow Capital default and falling crypto prices cited as reasons. Genesis, DCG’s lending arm, filed for Chapter 11 bankruptcy in January 2023, owing $2.36 billion to 3AC, which filed for bankruptcy in July 2022. DCG’s Q4 losses amounted to $24 million, with revenues of $143 million. Full-year 2022 revenues were $719 million, and the firm held total assets of $5.3 billion.
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Genesis Restructuring
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.
Following these developments, DCG’s equity valuation came in at $2.2 billion, and its price per share was $27.93, representing the sector’s decline in equity values.
