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DCG losses exceed $1 billion following 3AC collapse in 2022

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Cryptocurrency venture capital conglomerate Digital Currency Group (DCG) posted losses of more than $1 billion in 2022, largely due to contagion from the collapse of crypto hedge fund, Three Arrows Capital (3AC).

DCG would have lost $1.1 billion last year, according to its fourth quarter 2022 investor report, and said the results “reflect the impact of Three Arrow Capital’s default on Genesis” as well as “the negative impact of falling crypto prices.

Genesis is the lending arm of DCG, the company filed for Chapter 11 bankruptcy in late January. Genesis is 3AC’s largest creditor as the company loaned $2.36 billion to the now bankrupt hedge fund, 3AC filed for bankruptcy in July 2022.

DCG’s fourth-quarter losses were $24 million, while revenue hit $143 million.

DCG’s revenue for the year 2022 was $719 million. The company held total assets of $5.3 billion with cash and liquid holdings of $262 million and investments — such as shares in its grayscale trusts — amounted to $670 million.

The remaining assets were held by divisions of its Grayscale asset management subsidiary and DCG’s Bitcoin (BTC) mining business, Foundry Digital.

Its stock valuation came in at $2.2 billion with a price per share of $27.93, which the report said was “broadly consistent with the 75% to 85% decline in stock value.” shares of the sector during the same period”.

That’s a significant drop from just over a year ago, when DCG said on November 1, 2021 that its valuation was over $10 billion following the $700 million sale of shares in companies like Alphabet Inc., the parent company of Google.

Related: Genesis Capital’s Fall Could Transform Crypto Lending — Not Bury It

However, the company said it had “taken an important step” with the Genesis restructuring.

The deal proposed earlier in February would see DCG bring its equity stake in the Genesis business entity and bring all Genesis entities under the same holding company and see its business entity sold.

DCG would also exchange an existing $1.1 billion promissory note due 2032 for convertible preferred stock. Its existing 2023 term loans totaling $526 million would also be refinanced and made payable to creditors.

A Genesis creditor said the plan “has a collection rate of approximately $0.80 per dollar deposited, with a path up to $1.00” for those owed by the company.