The crypto investor DCG reveals a network of investments between units

The crypto conglomerate Digital Currency Group used funds that had been lent by its battered Genesis unit to invest in the products of another subsidiary, which highlighted the delicate connections in the Empire of the billionaire Barry Silbert.

Silbert wrote to the shareholders on Tuesday and said that DCG had borrowed $ 575 million from his broker Genesis, who is now looking for funds to avert the collapse in a accelerating crisis in the entire industry.

The Financial Times announced

DCG that it had used part of this means to buy an investment product that was issued by Grayscale, another of its companies, which runs a Trust noted in the USA that pursues Bitcoin's price.

DCG does not have the public profile of stock exchanges such as FTX or Binance, but is one of the largest and earliest investors in a crypto industry that is still affected by the collapse of Sam Bankman-Frieds FTX this month. This recent unveiling emphasizes the connections within the Silbert Group, which was estimated last year by investors such as Softbank, Singapore State Fund Gic and Google's Venture Arm CapitalG.

The New York company Genesis Trading stopped the payments from his loan unit last week, citing "unprecedented market turbulence" and has been trying to obtain cash since then. It said this week that it was not threatened by an "immediate" bankruptcy, but since Moelis investment bankers had stopped to help explore "all possible options".

According to US securities reports,

DCG has issued $ 772 million for purchases of shares of the Grayscale Bitcoin Trust (GBTC) on the open market since March 2021. Some of the DCG purchases were financed with US dollars and Bitcoin that the group of Genesis Trading borrowed, DCG told the FT.

Silbert informed the investors that DCG borrowed $ 575 million of Genesis "under the customary market conditions" in order not to finance "investment opportunities" openly and to buy DCG shares back from non-employed shareholders.

DCG said the FT then that "part" of the credit of genesis was used to finance GBTC purchases and that $ 300 million were spent on the share return purchases.

The Grayscale Trust Units bought by DCG have been very popular since then. According to an FT analysis, the weighted average price of purchases since March 2021 was $ 40, but the units closed at $ 9.23 on Wednesday. DCG said it had other compensation positions that made its GBTC purchases "market-neutral".

By October this year, dealers who wanted to deposit Bitcoin in return for the more manageable GBTC units in the Grayscale Trust had to use Genesis as an exclusive emission center. The Grayscale Trust pays an annual fee of 2 percent of its managed assets to Grayscale, which is owned by the DCG.

The investment in GBTC had previously brought simple profits, since it was traded with a surcharge on the price of the underlying Bitcoin assets by the beginning of 2021. The premium was created in a traditional financial structure due to the demand for Bitcoin.

GBTC is now trading on the price of Bitcoin with a steep discount of 39 percent. The US Securities and Exchange Commission has repeatedly refused to convert the Grayscale Trust into a stock market -traded fund structure that is open to private investors.

The popularity of GBTC when it was traded with a premium, and the ease of trade in the units led to the fact that it was often used as security in crypto loan allocation, also by Genesis itself.

The Silbert holding company has pumped money in Genesis for the industry this year after a series of top -class shocks. One came after Genesis lost $ 1.1 billion in a loan on the collapsed hedge fund Three Arrows Capital, who pledged GBTC as security for the loan. DCG then took over the liabilities of Genesis and owed Genesis $ 1.1 billion, said Silbert on Tuesday.

In recent times, DCG Genesis has injected $ 140 million hours before FTX registered bankruptcy. Since then, Genesis has been striving for additional new financing and announced its customers on Wednesday that it works with DCG and Exchange Gemini to support liquidity.