DCG’s carefully crafted campaign of lies?

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The monumental collapse of FTX not only destroyed a crypto exchange and wiped out billions in customer deposits, it also exposed accounting irregularities within the Barry Silberts empire, the Digital Currency Group or DCG. That’s according to Bitcoin (BTC) billionaire and Gemini co-founder, Cameron Winklevoss. The FTX explosion caused Genesis Global Trading, another DCG company, to suspend new loans and repayments, a decision that directly affected the Winklevoss Gemini Earn program. The withdrawal pause has been active for nearly two months, prompting Winklevoss to pen two open letters to Silbert and the DCG board. The second open letter, released this week, claimed Silbert was unfit to lead DCG and that there would be no way forward with him at the helm.

Following on from last week’s Crypto Biz newsletter, this week’s agenda again focuses on the dispute between Winklevoss and Silbert. We also chronicle the latest Coinbases layoffs and the status of the sale of Voyagers to Binance.US.

Cameron Winklevoss: There is no way forward as long as Barry Silbert remains CEO of DCG

In a four-page letter to DCG’s board of directors, Winklevoss claimed that Silbert, DCG and Genesis orchestrated a carefully designed campaign of lies to hide a $1.2 billion hole in Genesis’ balance sheet after the collapse of Three Arrows Capital (3AC). Once 3AC went bankrupt, Silbert had two options: restructure Genesis’ loan book or fill the hole. According to Winklevoss, Silbert did neither and pretended to pump new money into the loan company. Winklevoss also alleged that there were recursive swaps between 3AC and the Grayscale Bitcoin Trust (GBTC), which effectively amounted to transactions of swapping Bitcoin for GBTC by Genesis. These misrepresentations […] were a sleight of hand designed to make it look like Genesis was solvent and able to meet its obligations to lenders without DCG committing to provide the financial backing necessary to make that true, Winklevoss said.

Win an Update: An Open Letter to the @DCGco Board pic.twitter.com/eakuFjDZR2

Cameron Winklevoss (@cameron) January 10, 2023 Digital Currency Group under investigation by US authorities: report

Digital Currency Groups’ legal troubles appear to be worsening as federal prosecutors in New York begin to examine its internal dealings. According to Bloomberg, authorities are investigating internal transfers between DCG and its subsidiary Genesis Global Capital and have requested interviews and documents from the companies. According to a person familiar with the matter, the United States Securities and Exchange Commission is also part of the investigation. Genesis’ losses began to mount after hedge fund Three Arrows Capital collapsed. Since then, speculation about DCG’s insolvency has escalated.

Coinbase to cut another 20% of its workforce in second wave of layoffs

Looking for a career in crypto? Now is probably not the best time as bear market losses continue to mount. This week, crypto exchange Coinbase announced that it would cut its workforce by a further 20% to reduce operational costs. Coinbase laid off around 18% of its staff in June before the collapse of FTX dealt an unexpected blow to the industry, leading to another round of mass layoffs. CEO Brian Armstrong gave the usual assurance that Coinbase would come out stronger going forward. In reality, it could be years before traditional investors take a new look at digital assets.

Voyager and Binance.US Deal Approved Amid National Security Investigation

Binance.US’ proposed acquisition of Voyager Digital is one step closer to completion after a New York bankruptcy judge cleared the bankrupt crypto lender to enter into an asset purchase agreement and seek the creditors’ approval for the sale. At the same time, Voyager responded to questions from the Committee on Foreign Investment in the United States (CFIUS), which likely has concerns about the transaction. CFIUS is an interagency body responsible for reviewing foreign acquisitions of US companies for national security reasons. The sale of Voyagers to Binance.US was initially agreed in December 2022 for $1.022 billion.

Before you go: Is the bear market running out of steam?

Bitcoin and the broader crypto market saw a rare rally earlier this week, prompting cautious optimism that the worst of the recession was over. Has the crypto market bottomed out, or can we expect more pain in the near future? In this week’s market report, I sat down with fellow analysts Marcel Pechman and Joe Hall to discuss the possibility of bullishness after the latest rally (if you can even call it that). You can watch the full replay below.

Crypto Biz is your weekly pulse of the activity behind blockchain and crypto, delivered straight to your inbox every Thursday.

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