The crypto conglomerate’s digital currency group used borrowed money from its Genesis unit to invest in other subsidiaries, highlighting the tight ties between billionaire Barry Silbert’s empire.

In a letter to shareholders on Tuesday, Silbert said DCG had borrowed $575 million from broker Genesis, which is looking for cash to stave off bankruptcy amid a deepening crisis in the industry.

DCG told the Financial Times that some of these funds, which operate a US-listed trust that tracks the value of bitcoin, were used by another of its businesses to buy investment products offered by Greyscale.

DCG lacks the public profile of exchanges like FTX or Binance, but is one of the biggest and earliest investors in the crypto industry, reeling from the fall of Sam Bankman-Fried’s FTX this month. The latest revelation highlights the ties to the Silbert Group, which was valued at $10 billion last year, including SoftBank, Singapore sovereign wealth fund GIC and Google’s venture arm CapitalG.

New York-based Genesis Trading halted withdrawals from its lending unit last week, citing “unprecedented market turbulence,” and has been looking to raise cash ever since. This week it said it was not in “imminent” danger of bankruptcy but had hired Moellis investment bankers to help it explore “all possible options”.

DCG has spent $772mn on open market purchases of Greyscale Bitcoin Trust (GBTC) units from March 2021, according to US securities. DCG told the FT that some of DCG’s purchases were funded by US dollars and bitcoin the group borrowed from Genesis Trading.

Silbert told investors that DCG had borrowed $575mn from Genesis to fund undisclosed “investment opportunities” and buy back DCG shares from non-employee shareholders.

DCG subsequently told the FT that part of the loan from Genesis was used to finance the GBTC buybacks and $300mn was spent on share buybacks.

The units of the Greyscale trust that DCG bought have fallen sharply in value. According to FT analysis, the average price for purchases from March 2021 was $40, but the shares closed at $9.23 on Wednesday. DCG said it had other compensation positions that made the GBTC purchase “market-neutral.”

Until October this year, traders who wanted to deposit bitcoin into a Grayscale trust for easily traded GBTC units had to use Genesis as the exclusive issuing agent. The Greyscale Trust pays a 2 per cent fee on its assets under management to DCG-owned Greyscale.

Investing in GBTC has previously yielded easy profits for traders as it was traded at the price of the main Bitcoin asset until early 2021. The premium was due to demand for Bitcoin wrapped in traditional financial structures.

GBTC is now trading at a massive 39% discount to the price of Bitcoin. The US Securities and Exchange Commission has repeatedly refused to allow a grayscale trust to convert to an exchange-traded fund structure open to retail investors.

GBTC’s popularity while trading at a premium and the ease of trading its units has seen it widely used as collateral in crypto loans, including by Genesis itself.

Silbert Holding Company has poured cash into Genesis after the industry’s biggest shocks this year. One came after Genesis defaulted on a $1.1 billion loan to collapsed hedge fund Three Arrows Capital, which pledged GBTC as collateral on the loan. DCG assumed Genesis’ $1.1 billion in debt in the process, Silbert said Tuesday.

Recently, DCG FTX pumped $140 million into Genesis before it filed for bankruptcy. Genesis has been scrambling to raise more fresh financing since then, and on Wednesday told clients it was working with DGG and the Gemini exchange to boost liquidity.


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