Digital Currency Group Halts Dividend Amid Genesis Crisis

Cryptocurrency conglomerate Digital Forex Group (DCG) stated it halted dividend funds, telling shareholders that it is centered on strengthening its steadiness sheet by reducing prices because it copes with fallout from the FTX meltdown that was itself triggered by reporting by one in every of its personal models.

Key Takeaways

  • Digital Forex Group (DCG), a cryptocurrency conglomerate, halted dividend funds Tuesday to protect money.
  • DCG is underneath stress because of the collapse of the FTX crypto alternate in late 2022. One among its models, on-line publication CoinDesk, first broke the information of FTX’s shaky funds.
  • Extra bother could also be lie forward for DCG after one other subsidiary, Silvergate Capital, reported a multibillion-dollar shortfall in shopper deposits.

DCG Empire Suffers Shockwaves from FTX Collapse

The motion is an extra step taken by DCG to comprise injury ensuing from the collapse of FTX in late 2022, which rocked DCG’s portfolio of crypto investments. DCG’s issues middle on the destiny of one in every of its subsidiaries, crypto dealer Genesis International Buying and selling, which is claimed to owe collectors greater than $3 billion. Genesis has $175 million locked up within the failed FTX alternate and prospects of the crypto lender have had their funds frozen since Genesis halted withdrawals on Nov. 16, 2022.

The issues at Genesis have led to a high-profile spat between DCG’s founder and chief govt officer (CEO), Barry Silbert, and the Winklevoss twins, founders of crypto alternate Gemini. Genesis and Gemini partnered on the Earn crypto lending product, which additionally was pressured to droop withdrawals. Cameron Winklevoss stated DCG’s lack of ability to repay the alternate was defrauding his firm and its 340,000 buyers, whereas calling for Silbert to step down.

DCG Dividend Lower Could Not Be Sufficient

DCG’s efforts to chop prices by halting its dividend will not be sufficient to avoid wasting the troubled conglomerate. One other DCG subsidiary, publicly listed crypto financial institution Silvergate Capital Corp. (SI), on Jan. 5 introduced it skilled a shortfall of greater than $8 billion in deposits. “Whole deposits from digital asset prospects declined to $3.8 billion at December 31, 2022, in comparison with $11.9 billion at September 30, 2022,” Silvergate Capital stated.

At the moment, Silvergate additionally introduced it laid off 40% of its workforce, or about 200 staff.

Shares of Silvergate are down virtually 50% because the Jan. 5 buying and selling replace and buyers can be involved about additional withdrawals that would push the agency over the brink. Silvergate on Tuesday introduced a $1 billion internet loss attributable to shareholders for the fourth quarter, swinging from a internet revenue of $18.4 million within the year-earlier quarter.

The corporate stated within the earnings launch: “As Silvergate prepares for what it expects can be a sustained interval of decrease deposits, it’s taking a number of actions to assist make sure the enterprise is resilient, together with managing its expense base and evaluating its product portfolio and buyer relationships going ahead.”

The Backside Line

As fallout over the FTX collapse continues, Digital Forex Group’s halt to shareholder dividends provides to a string of damaging information concerning the crypto conglomerate. The corporate has stated it’s now centered on reducing working bills and preserving liquidity, so extra such powerful decisions could also be forward to stabilize the group.

On the similar time, DCG’s CEO has did not make clear whether or not he’ll proceed to steer the troubled agency amid requires his resignation.

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