Cryptocurrency venture capital conglomerate Digital Currency Conglomerate (DCG) has reported losses of more than $1 billion in 2022 due largely to contagion related to the collapse of crypto hedge fund, Three Arrows Capital (3AC).
DCG reportedly lost $1.1 billion last year, according to a Q4 2022 investor report, and said the result “reflects the impact of Three Arrow Capital’s default on Genesis” along with the “negative impact” of falling crypto prices.
Genesis is the debt arm of DCG, a company that filed for Chapter 11 bankruptcy in late January. Genesis is 3AC’s largest creditor because the company loaned the now bankrupt hedge fund $2.36 billion, 3AC filed for bankruptcy in July 2022.
DCG’s fourth quarter loss came in at $24 million while its profit was $143 million.
The 2022 revenue for DCG is about $719 million. The company has total assets of $5.3 billion with cash and liquid holdings of $262 million and investments – such as shares in the Grayscale trust – of $670 million.
The remaining assets are held by a division of Grayscale’s asset management subsidiary and Bitcoin (BTC) mining business DCG Foundry Digital.
The equity valuation is at $2.2 billion at a price per share of $27.93 which the report says is “generally consistent with the 75%-85% decline in equity value over the same period.”
This is a significant drop from just over a year ago, when DCG announced on November 1, 2021, that it would be worth more than $10 billion after selling $700 million in shares to companies like Alphabet Inc., Google’s parent company.
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However, the company said it had “reached a milestone” with the restructuring of Genesis.
An agreement previously proposed in February would have seen DCG contribute equity in the Genesis trading entity and bring all Genesis entities under the same holding company and see the trading entities sold.
DCG will also exchange $1.1 billion of existing promissory notes due in 2032 for convertible preferred stock. Existing 2023 term loans in the aggregate amount of $526 million will also be refinanced and payable to creditors.
A lender Genesis said the plan “has a recovery rate of approximately $ 0.80 per dollar deposited, with a path to $ 1.00 “for those who owe money by the firm.