WSJ News Exclusive | Digital Currency Group Says Revenue Will Fall This Year

DCG is trying to assuage the fears of crypto traders and investors following the meltdown of crypto exchange FTX this month. Exposures that once seemed manageable have grown across the crypto industry, and investors are questioning the health of firms once viewed as safe.  

DCG is also the parent company of Grayscale, which manages the world’s largest bitcoin fund. Shares in the

Grayscale Bitcoin Trust

traded Monday at a 43% discount to their underlying stated holdings of bitcoin. On Friday,

Coinbase Global Inc.’s

custody arm vouched for the security of Grayscale’s digital assets held there. 

“We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger,” Mr. Silbert wrote. Mr. Silbert said in the investor letter that DCG’s other businesses, which include the media company CoinDesk and bitcoin-mining firm Foundry, were operating as usual. 

Earlier this year, DCG took on liabilities from Genesis after the hedge fund Three Arrows Capital defaulted on loans it took out from Genesis, prompting the issuance of the $1.1 billion promissory note while DCG tries to recover assets from Three Arrows’ liquidation proceedings. Separately, the roughly $575 million that DCG borrowed from Genesis went to fund investment opportunities and buy DCG stock from outside shareholders, Mr. Silbert said in the letter. The loans were arm’s-length transactions priced at market rates, he said. 

After FTX imploded, Genesis said on Twitter that it had hedged and sold collateral, resulting in a total loss of about $7 million. The company also said its derivatives business has about $175 million in locked funds in the firm’s FTX trading account. 

In August, Genesis laid off 20% of its 260-person workforce, and then-Chief Executive

Michael Moro

left. This month, DCG laid off over 10% of its workforce in a restructuring that left the firm with 66 employees.

Genesis has also been trying to raise cash. Crypto exchange Binance decided not to invest after being approached by Genesis for an investment and to bid for its loan book. The company also asked private-equity giant

Apollo Global Management

for capital assistance, The Wall Street Journal has reported.

A year ago, DCG was riding high. A $700 million investment round for the Stamford, Conn.-based company last November valued it at $10 billion. 

Write to Peter Rudegeair at [email protected] and Vicky Ge Huang at [email protected]