Bitcoin Baron Barry Silbert Racks Up Enemies As Crypto Lending Crisis Escalates

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Barry Silbert, the founder of Digital Currency Group, is far from the most colorful crypto executive.

Barry Silbert, the founder of Digital Currency Group, is far from the most colorful crypto executive. In an industry populated by billionaire impresarios, die-hard evangelists and die-hard fraudsters, the 46-year-old CEO looks and looks like a middle manager at a regional bank. His innocuous behavior and relatively long tenure in Bitcoin served him well as he secured funds from companies like SoftBank and built a vast network of businesses that touch virtually every corner of cryptocurrency.

This reach has placed it at the center of a storm hitting crypto lenders like DCG’s Genesis Global Capital with questionable loans, deposits and growing mistrust threatening to send the loosely regulated industry into its own version of the crisis. of Wall Street credit in 2008.

The turmoil has left Silbert locked in an escalating battle with crypto exchange Gemini co-founder Cameron Winklevoss, whose clients lost access to $900 million in funds placed with Genesis. US authorities are reportedly investigating DCG’s internal financial transaction network. And Genesis has warned that it could file for bankruptcy if it cannot raise the necessary funds.

Even DCG’s Grayscale Bitcoin Trust, the world’s largest crypto fund, traded at a steep discount to the amount of cryptocurrency it holds, upsetting its shareholders.

The struggles mark an about-face for Silbert, a former investment banker who worked on the Enron bankruptcy. His push into crypto left him with a personal fortune once estimated at $3 billion. As the crypto boom gained momentum, it aspired to transform DCG into a Standard Oil-like conglomerate that would dominate the world of digital currencies.

The downturn, however, caused his net worth to drop below $700 million, according to the Bloomberg Billionaires Index. And Silbert, an entrepreneur who built his career in dark markets, now faces a crisis of confidence among investors who suddenly panic over risks they may not see.

A difficult year

In a letter to DCG shareholders on Tuesday, Silbert sought to allay those concerns.

This past year has been the hardest of my life both personally and professionally, he wrote. It’s been hard to question my integrity and good intentions after spending a decade putting everything into this business and into the space with a relentless focus on doing things the right way.

At the heart of Stamford, Connecticut-based DCG’s recent issue is Gemini Earn, a product offered by the twins’ crypto firm Winklevoss in partnership with Genesis.

With a simple name and premise, it offered crypto investors a tantalizing opportunity: park your virtual coins and earn up to 8%. It was the kind of return that was particularly attractive at a time when interest rates were at rock bottom, when traditional savings accounts were earning next to nothing. Business exploded.

Yet even during the crypto’s peak, doubts arose about how Genesis could offer such high returns. A potential business partner, who requested anonymity because the talks were private, said Genesis did not respond to a series of questions, including a request for the names of its banking partners and financial statements.

Such questions now seem prescient. In November, after the rapid collapse of FTX sent shockwaves through the crypto market, Genesis abruptly halted withdrawals. Some 340,000 Gemini users have been unable to access around $900 million in funds.

Since then, Gemini’s Cameron Winklevoss has fought an increasingly public fight with Silbert. On Tuesday, he called on DCG’s board to oust the CEO, alleging he defrauded Gemini customers and lied about his support for Genesis after hedge fund Three Arrows Capital fell, one of the first victims. high profile of the crypto crash.

In an emailed statement, DCG spokeswoman Amanda Cowie called the board request a desperate and unconstructive publicity stunt by Cameron Winklevoss to deflect blame away from himself and Gemini. who are solely responsible for operating Gemini Earn and marketing the program to its customers, adding that the claims were malicious, false and defamatory.

Silbert said in his letter that DCG had not mixed any money from his companies and that the company was not aware of any investigation into this matter by federal prosecutors in New York, as previously reported by Bloomberg.

Silvbert has experience with companies in crisis. After graduating from Emory University during the dotcom bubble in 1998, Silbert began his career as an investment banker at Houlihan Lokey Inc., where he worked on the Enron and WorldCom bankruptcies.

This work helped launch his idea for SecondMarket, a marketplace he founded for hard-to-trade assets. SecondMarket has carved out a niche for itself in brokering stocks of companies that weren’t yet publicly traded, like Facebook and Twitter. This part of the business was sold to the Nasdaq in 2015.

He was ahead of the curve, identifying opportunities, but we always moved to create black and white rules around things that were gray, said Annemarie Tierney, founder of Liquid Advisors, who was general counsel at SecondMarket and worked with Silbert for almost five years. .

While running SecondMarket, Silbert liked to describe it to investors as a tech company engaged in projects such as building sophisticated exchange technology called a matching engine, according to a person familiar with the matter, although she’s pressed hard on the phone. techniques long used on Wall Street.

Former colleagues have described Silbert as an entrepreneur with a knack for sniffing out trends before they burst to the surface. In 2012, he invested in a small Wisconsin company called Murfie, which stored people’s CD and vinyl collections and downloaded their music virtually, at a time when music streaming was nascent.

He really understood things from a founder’s perspective, said Matt Younkle, former CEO of Murfie. He was knowledgeable, well connected and always available to provide advice.

That same year, a more advanced technology caught Silbert’s attention: Bitcoin. He bought his first token, without telling his wife, according to an interview with the New York Stock Exchange. He founded DCG in 2015.

Just go long ‘

Like other early adopters, he was resolutely optimistic. In an interview with Fortune Magazine, Silbert described DCG’s strategy for investing in digital assets: We don’t trade, we don’t leverage, we don’t short sell. We just go long.

DCG went on to control several crypto companies and backed over 200 blockchain-related businesses globally. His investments have helped legitimize digital currencies as a credible asset class for millions of investors.

DCG also owns CoinDesk, a news site whose revelations about Sam Bankman-Fried’s crypto empire helped trigger its demise. Genesis had been one of the biggest lenders to institutional investors, making $130.6 billion in loans in 2021. Now its fate looks uncertain.

As Silbert’s influence and fortune soared, he kept a lower public profile than some of his peers, eschewing his earlier penchant for media appearances that earned him the nickname Barry Shillbert.

The 2022 crypto downturn has thrust it back into the limelight. It also resurfaced a few familiar characters.

Houlihan Lokey, the investment bank where Silbert started his career, worked with Gemini. His mission: Recover funds stuck in limbo at Genesis.

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