DCG’s Silbert fishes for sympathy in crypto row with Winklevoss twin

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Barry Silbert wants crypto investors suffering from a series of scandals to know that life has been tough for him, too.

Amid calls for his resignation as CEO, the founder of crypto empire Digital Currency Group said he misses the haste he once fought in the trenches alongside other community members for a greater legitimacy of virtual coins and tokens.

I have fond memories of the early days of our industry, he recalled in a letter to DCG shareholders on Tuesday, in which he pledged it would emerge a stronger company in the new year. .

In the 10 years since DCG was founded, Silbert recounted how the holding helped create the largest digital asset manager (Grayscale), as well as the leading Bitcoin mining pool (Foundry USA) and from a highly influential crypto media publication (CoinDesk), whose reporting on Alameda Creaky Finance Research helped bring down FTX.

However, all things come to an end, and so does the Silberts’ winning streak.

I’ve been thinking a lot about the past year, the state of the industry and what’s next.

Here’s an update to address those thoughts, other developments, and some speculation from @DCGco (1/10) https://t.co/xEohthubvD

Barry Silbert (@BarrySilbert) January 10, 2023

The heady tsunami of central bank liquidity that carried the most questionable risk assets aloft came crashing down after the Fed shut down its printing press early last year. Tokens and coins have since crashed while the value of crypto stocks like Coinbase effectively evaporated, overnight alongside other growth names like Tesla.

With the bursting of the bubble, the winds that were once at Silbert’s back have abruptly changed direction for the billionaire entrepreneur.

This past year has been the hardest of my life, he writes, both personally and professionally.

Silbert urged investors to come together in the new year, saying it was time to end the endless bickering and bickering over who exactly was to blame for the string of crypto scandals.

Looking to 2023 and beyond, the industry has a lot of work to do to restore its credibility and reputation, which has been all but destroyed by an unprecedented wave of fraud and criminal behavior unlike anything i ‘ve seen in my career, he wrote.

No reason to believe he is under investigation

The letter comes after Cameron Winklevoss, chairman of crypto exchange Gemini, wrote a detailed account on Tuesday of the fraud he said occurred at holding company DCG and its lending and brokerage subsidiary of crypto Genesis following the collapse of creditor Three Arrows Capital (3AC).

The liquidation of the latter left the Silberts empire with uncollected debts amounting to $1.2 billion which had to be transferred from Genesis to DCG in order to maintain the solvency of the operating company.

Crypto stocks over the past year:

Voyager -99.7%Silvergate -90.8%Marathon Digital -83.1%Coinbase -82.3%HIVE Blockchain -81.3%MicroStrategy -63.9%

Geneviève Roch-Decter, CFA (@GRDecter) January 10, 2023

Instead of restructuring Genesis in bankruptcy court, Winklevoss claimed that Silbert tried to make up for the loss through highly questionable accounting tricks suggesting that the hole in Genesis’ balance sheet had been filled without injecting additional cash under the form of loss-absorbing equity.

Silbert achieved this through DCG’s issuance of a $1.1 billion promissory note to Genesis due in 2032, essentially an intercompany loan that the holding company took out from its subsidiary.

The embattled entrepreneur did not deny its existence. Instead, Silbert explained that this financing agreement in which his subsidiary exchanged assets in the form of legal claims on the insolvency estate of 3AC in exchange for an IOU from DCG payable for the first time in ten years had been recommended by financial and legal advisers.

The DCG founder said he had no knowledge or reason to believe there was an investigation into the case by New York District attorneys, as Bloomberg reported last week.

Responding to some of the underlying charges of fraud made by Winklevoss but not others, Silbert said his holding company brought about $340 million in equity to Genesis after 3AC’s collapse.

It’s been hard to question my integrity and good intentions after spending a decade pouring everything into this company and the space with a relentless focus on doing things right, the CEO wrote in response to its detractors.

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