(Bloomberg) -- The banning of cryptocurrency brokers on Genesis has cast an unusual spotlight on Barry Silbert, the man who runs the empire of the digital currency group, amid increasing volatility in the crypto market.
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Silbert, 46, founded the Stamford, Connecticut-based crypto conglomerate DCG in 2015, according to his LinkedIn profile. DCG's valuation topped $10 billion last year following a $700 million private sale led by SoftBank Group Corp. It's sold out. As of November, DCG has 66 employees and the DCG portfolio includes more than 200 companies.
DCG's reach is extensive: in addition to lender Genesis, he oversees Grayscale Investments, a digital asset manager offering the world's largest crypto fund. DCG is also the parent company of crypto mining service provider Digital Foundry, media company Coindesk and stock exchange Luno, among others. DCG declined a request to interview Silbert.
DCG in the Power crypto space is very well known. Over the years, the private company's portfolio has included everything from exchanges like Coinbase to hardware maker Ledger to crypto-focused bank Silvergate.
"They're huge in crypto," said Wilfred Day, CEO of digital asset management firm Securities Capital. "Your footprints are everywhere."
©Bloomberg Guest speaker at the 2019 SALT conference . To better understandThe Genesis Acquisition fiasco, which started after the shocking boom of Bahamas-based crypto exchange FTX and former CEO Sam Bankman-Fried, threatens DCG's health. Genesis is the crown jewel of the Silbert empire and positions itself as one of the largest and most important brokers to finance and market makers by lending dollars or digital currency to grow their business.
"There are a lot of lessons to be learned here," said Campbell Harvey, professor of finance at Duke University. "The level of due diligence may increase in the future. Having a meaningful relationship with a transparent offshore company is unacceptable, regardless of the popularity of the founder."
Silbert first bought Bitcoin in 2012 when the industry was still in its infancy. He founded the company with partners who would later become crypto luminaries, including Michael Moreau, who stepped down as CEO of Genesis in August, as well as Ryan Selkis, co-founder of Messari researcher, and chief strategy officer Meltom Demirs. Digital property. CoinShares investment company.
Grayscale was spared the recent upheaval, with the company saying Wednesday that its products were operating normally. However, wealth managers face problems of their own. Grayscale's $10.7 billion Bitcoin Trust (ticker GBTC) is trading at an all-time high relative to the bitcoin it holds because the trust structure does not allow redemption. Greyscale sued the US Securities and Exchange Commission in June.
© Bloomberg GBTC price is trading at a discount to the underlying bitcoin.But even at the record discount, GBTC is seen as a cash cow for Grayscale – and by extension DCG. The trust costs shareholders 2% per year. This means that although GBTC has lost billions in value since its total assets topped $40 billion last November, according to Bloomberg calculations, Grayscale is still generating more than $200 million annually in deposit fees at current levels. .
Genesis' move on Wednesday will only affect its credit business, said Derara Islam, the company's chief executive, while the company's cash and derivatives trading and warehousing business is fully operational. But only after a painful period for the broker, the withdrawal was decided to stop.
The rift appeared after the bankruptcy of Genesis at the hands of hedge fund Three Arrows Capital. Genesis is the largest lender in liquidation after the fund breached margin requirements. DCG accepted some liability and filed a $1.2 billion lawsuit against the Three Arrows. Genesis said in October – before the FTX boom – that credit fell 80% in the third quarter.
“Genesis Global Capital, Genesis' lending business, has made the difficult decision to temporarily suspend payments and new loans. This decision was made in response to significant market disruption and lack of confidence in the industry caused by the FTX boom, said company spokeswoman Amanda Cowie. “This affects Genesis' lending operations, not Genesis' business operations or development. This is DCG. It is important to note that it does not affect our wholly owned subsidiaries.
In the recent upheaval in the brewing business, DCG has replaced its CEO. Mark Murphy was promoted from chief operating officer to president as part of a reorganization that saw about 10 employees leave the company. Several members of the business department, as well as the head of market analysis and chief risk officer, have left.
Silbert founded DCG after a 2015 secondary market sale on the Nasdaq. Prior to SecondMarket, Silbert worked at Houlihan Lokey after graduating from Emory University, he says on his LinkedIn profile.
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--Prepared by Muyao Shen, Olga Kharif and Anna Irera.
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