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DCG CEO to Shareholders Letter (full text)

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"Revenue could reach $800 million this year. We believe we will come out of the crypto cold winter."

Barry Silbert, CEO of DCG

Wu said Real

Dear shareholders, there has been a lot of noise over the past week and I wanted to communicate directly with you to clarify our position at DCG.

Most people know what happened to Genesis, but let's recap: Genesis Global Capital's loan business suspended redemptions and new loan originations last Wednesday (Nov 16) after market turmoil triggered unprecedented requests for withdrawals. It was a mismatch between liquidity and duration on Genesis's loan book. Importantly, these issues will not affect Genesis's spot and derivatives trading or custody businesses, which will operate as usual. Genesis' leadership and board of directors decided to retain financial and legal counsel, and the company was exploring all possible options in response to the FTX collapse.

In recent days, rumors have swirled about an intercompany loan between Genesis Global Capital and DCG. For those not in the know, in the normal course of business, DCG borrowed from Genesis Global Capital in the same way that hundreds of cryptocurrency investment firms do. The loans were always structured on a fair basis and priced at prevailing market rates. DCG currently has approximately $575 million in debt to Genesis Global Capital, which matures in May 2023. The loans were used to fund investment opportunities and to repurchase DCG shares from non-employee shareholders, transactions highlighted in the quarterly shareholder update. To this day, I have never sold my DCG shares.

You may recall that there is a $1.1 billion promissory note due in June 2032. As stated in our last shareholder letter in August 2022, DCG stepped in and assumed certain liabilities for Genesis in relation to the 3AC breach. As stated in August, since these are now DCG's liabilities, DCG is participating in 3AC's liquidation proceedings before the creditors Committee and is pursuing all available remedies to recover the assets for the benefit of the creditors. Aside from Genesis Global Capital's intercompany loan and long-term promissory note due in May 2023, DCG's only debt is a $350 million credit facility from a small group of creditors led by Eldridge.

Put it this way: DCG will continue to be a leading builder in the industry, and we are committed to our long-term mission of accelerating the development of a better financial system. We have weathered previous secret winters, and while this one may feel tougher, we will come out of it stronger together. DCG has only raised $25 million in primary capital, and we're on track to do $800 million in revenue this year.

Ten years ago, in 2012, I bought my first Bitcoin and decided to be in it for the long haul. In 2013, we started Genesis, the first bitcoin exchange, and the first Bitcoin fund, which grew into Grayscale, now the largest digital currency asset manager in the world. Foundry operates the world's largest bitcoin mining pool and is building the decentralized infrastructure of the future. CoinDesk is the industry's premier media, data, and events company, and they're doing amazing coverage this crypto winter. Luno is one of the most popular crypto wallets in the world and an industry leader in emerging markets. tradedeblock is building a seamless institutional trading platform, and HQ, as the latest subsidiary, is building a life and wealth management platform for digital asset entrepreneurs. These subsidiaries are separate businesses, independently managed and operating as usual. Finally, with over 200 companies and funds in our portfolio, we are often the first choice for the best founders in the industry.

We appreciate your encouragement and support, as well as your intention to invest in DCG. If we decide to raise a round of funding, we'll let you know.

Despite the difficult industry environment, I am as excited as ever about the potential of cryptocurrency and blockchain technology over the coming decades, and DCG is determined to stay on the cutting edge.