In a letter to shareholders published Tuesday, Digital Currency Group (DCG) founder and CEO Barry Silbert defended the company's relationship to troubled prime broker Genesis, addressing allegations made earlier on Tuesday and last week by Gemini co-founder and president Cameron Winklevoss.
"Bad actors and repeated blow-ups have wreaked havoc on our industry, with ripple effects extending far and wide," Silbert said.
"Although DCG, our subsidiaries, and many of our portfolio companies are not immune to the effects of the present turmoil, it has been challenging to have my integrity and good intentions questioned after spending a decade pouring everything into this company and the space with an unrelenting focus on doing things the right way."
Silbert's letter comes amid a running dispute between Silbert and crypto exchange Gemini around DCG’s culpability in the financial troubles of Genesis, a wholly-owned subsidiary of DCG.
Silbert's letter came just hours after Winklevoss, in his second open letter to DCG in as many weeks, alleged Silbert and others "conspired to make false statements and misrepresentations to Gemini" about Genesis' financial condition. In his telling, Winklevoss alleges these misrepresentations followed the $1.2 billion loss Genesis took over the summer from the default of a major borrower, the now-bankrupt hedge fund Three Arrows Capital.
"The industry has a lot of hard work to do to re-establish its credibility and reputation, which have been all but destroyed by a wave of unprecedented fraud and criminal behavior unlike anything I’ve seen in my career. This is going to be a challenging year for all of us, but I remain optimistic," Silbert added.
In a Q&A section of its letter, the Stamford, Conn.-based DCG said it doesn't "commingle cash" with its wholly-owned subsidiaries, as Gemini's Winklevoss has alleged.
"Commingling funds" has become a buzz phrase for the industry after the implosion of FTX; co-founder Sam Bankman-Fried said in multiple media interviews before his arrest he "didn't knowingly commingle funds," while its new CEO, John J. Ray III, testified before Congress customer funds on the platform were indeed commingled with FTX's associated hedge fund, Alameda.
DCG also made a point to distance itself from Genesis' restructuring process, saying that while it has "productively engaged with Genesis, its advisors, and an ad hoc group of certain Genesis creditors," DCG executives have "no decision-making authority" over Genesis restructuring due to the outstanding loans and promissory note.
In his letter on Tuesday, Winklevoss specifically took issue with a $1.1 billion promissory note given by DCG to Genesis, which he called a "complete gimmick."
Silbert, for his part, highlighted the note is not callable, meaning that DCG has no obligation to pay back Genesis creditors in an expedited fashion for the losses it assumed for Genesis, unless it receives proceeds from the liquidation of Three Arrows Capital. The note could be expedited, however, if DCG itself were to file for bankruptcy.
DCG said it owes Genesis approximately $605 million in loans at today's prices, which includes multiple loans subject to different maturity dates, including $525.5 million due in May of this year for bitcoin borrowings.
On December 29, Gemini customers filed a securities class action complaint against Gemini alleging the exchange's Earn program violated securities laws for touting it as a safe method to store crypto assets.
Along with Genesis, DCG serves as parent company to the world's largest crypto asset manager Grayscale, bitcoin mining player Foundry, media outlet Coindesk, and London-based crypto exchange Luno.
Silbert holds approximately a 40% stake in DCG as of its November 2021 capital raise that valued DCG at $10 billion.
DCG has "aggressively cutting costs over the last few months," Silbert said in the letter, recently reducing its workforce and winding down its newer wealth management division, HQ.
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DCG's Barry Silbert says 'my integrity and good intentions' being questioned in shareholder letter published amid running dispute with Cameron Winklevoss – Yahoo Finance
