Cryptocurrency venture capital conglomerate, Digital Currency Group (DCG), has posted losses of more than $1 billion in 2022 due in large part to contagion related to the bankruptcy of cryptocurrency hedge fund Three Arrows Capital (3AC).
DCG reportedly lost $1.1 billion last year, according to its fourth-quarter 2022 investor report, saying the results “reflect the impact of Three Arrow Capital’s default on Genesis” along with the “negative impact” of the drop in cryptocurrency prices.
Genesis is the credit arm of DCG, the firm is filed for bankruptcy under Chapter 11 of the Bankruptcy Law at the end of January. Genesis is 3AC’s largest creditor, since the company lent the bankrupt hedge fund USD 2,360 million, 3AC filed for bankruptcy in July 2022.
DCG’s fourth quarter loss was $24 million, while revenue was $143 million.
DCG’s revenues in 2022 amounted to USD 719 million. The company’s total assets were $5.3 billion, of which $262 million was in cash and liquidity, and $670 million in investments, such as shares in its Grayscale funds.
The rest of the assets were held by divisions of its asset management subsidiary Grayscale and DCG’s Bitcoin (BTC) mining business, Foundry Digital.
The valuation of its shares stood at USD 2.2 billion, with a price per share of USD 27.93, which, according to the report, “in general coincides with the decline of 75% to 85% of the value of the shares of the sector during the same period.”
This is a significant drop from a little over a year ago, when DCG declared on November 1, 2021 that its valuation exceeded $10 billion after the sale of shares worth USD 700 million to companies such as Alphabet Inc, the parent of Google.
Under the deal proposed in February, DCG would contribute its interest in the Genesis business entity, all Genesis entities would become part of the same holding company, and their business entity would be sold.
DCG would also exchange an existing $1.1 billion note due 2032 for convertible preferred shares. Its existing term loans due 2023 for an added value of USD 526 million would also be refinanced and made payable to creditors.
A Genesis creditor said that the plan “has a recovery rate of approximately $0.80 per dollar deposited, with a $1 dollar target” for company debtors.
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