DCG’s Barry Silbert reveals crypto firm has $2 billion in debt as he tries to calm investors after FTX
Barry Silbert, the founder of crypto conglomerate Digital Currency Group, has joined a growing list of industry leaders in trying to settle investors’ nerves after the sudden collapse of FTX.
In a note to shareholders on Tuesday, Silbert addressed all the “noise” about the financial health of DCG’s subsidiaries, which includes trading firm Genesis, Grayscale Investments and mining company Foundry.
related investing news
Since FTX’s rapid winddown two weeks ago, investors have worried about a crypto contagion affecting every corner of the industry. Lenders have stopped lending, withdrawals have been more difficult and unregulated, little-understood tokens have plunged in value. The leading cryptocurrencies, bitcoin and ether, have also continued their year-long descent.
Silbert, an early bitcoin evangelist who founded DCG in 2015, said that despite the crypto winter, the overall company is on pace to generate $800 million in revenue this year on the back of just $25 million raised in primary capital since inception. Forbes estimates Silbert’s net worth at $2 billion.
“We have weathered previous crypto winters,” Silbert wrote, adding that “while this one may feel more severe, collectively we will come out of it stronger.”
Coinbase, Binance and Crypto.com have similarly done their best to assuage customer concerns to avoid an FTX-type run on customer deposits. They’ve each expressed shock at FTX’s apparent deceit of investors and customers and emphasized that client assets are secure.
That’s all with an awareness that FTX and founder Sam Bankman-Fried betrayed the trust of an industry that was already in the midst of a brutal year of losses. Bankman-Fried said his company’s assets were “fine” two days before he was desperate for a rescue because of a liquidity crunch.
Specific to DCG, investor confidence took a hit in the last week, when the Wall Street Journal reported that Genesis had been trying to raise $1 billion from investors before ultimately halting some withdrawals. There were reports that Genesis would soon file for bankruptcy, which the company publicly refuted.
Fear spread to the Grayscale Bitcoin Trust, known by its ticker GBTC, which lets investors get access to bitcoin through a more traditional security. GBTC is currently trading at a 42% discount to bitcoin, up from a discount of closer to 30% two months ago.
Regarding Genesis’ lending business, Silbert said in the letter that the suspension of redemptions and new loan originations on Nov. 16 was “an issue of liquidity and duration mismatch” in the loan book. These issues, he said, had “no impact” on Genesis’ spot and derivatives trading or custody businesses, which “continue to operate as usual.”
He acknowledged that Genesis has hired financial and legal advisors, as the firm considers its options.
DCG’s debts amount to just over $2 billion. The company loaned Genesis roughly $575 million, priced at “prevailing market interest rates,” which is due in May 2023. It also absorbed the $1.1 billion debt that the bankrupt crypto hedge fund Three Arrows Capital owed Genesis.
With Three Arrows in bankruptcy, DCG “is pursuing all available remedies to recover assets for the benefit of creditors,” Silbert wrote. DCG’s only other debt is a $350 million credit facility from “a small group of lenders led by Eldridge.”
Read the full letter from Silbert below:
There has been a lot of noise over the past week and I want to get in touch directly to clarify where we stand at DCG.
Most of you are aware of the situation at Genesis, but to recap up front: Genesis Global Capital, Genesis’ lending business, temporarily suspended redemptions and new loan originations last Wednesday, November 16 after market turmoil sparked unprecedented withdrawal requests. This is an issue of liquidity and duration mismatch in the Genesis loan book. Importantly, these issues have no impact on Genesis’ spot and derivatives trading or custody businesses, which continue to operate as usual. Genesis leadership and their board decided to hire financial and legal advisors and the firm is exploring all possible options amidst the fallout from the implosion of FTX.
In recent days, there has been chatter about intercompany loans between Genesis Global Capital and DCG. For those unaware, in the ordinary course of business, DCG has borrowed money from Genesis Global Capital in the same vein as hundreds of crypto investment firms. These loans were always structured on an arm’s length basis and priced at prevailing market interest rates. DCG currently has a liability to Genesis Global Capital of ~$575 million, which is due in May 2023. These loans were used to fund investment opportunities and to repurchase DCG stock from non-employee shareholders in secondary transactions previously highlighted in quarterly shareholder updates. And to this day, I’ve never sold a share of my DCG stock.
You may also recall there is a $1.1B promissory note that is due in June 2032. As we shared in our previous shareholder letter in August 2022, DCG stepped in and assumed certain liabilities from Genesis related to the Three Arrows Capital default. As stated in August, because these are now DCG liabilities, DCG is participating in the Three Arrows Capital liquidation proceedings on the Creditors’ Committee and is pursuing all available remedies to recover assets for the benefit of creditors. Aside from the Genesis Global Capital intercompany loans due in May 2023 and the long-term promissory note, DCG’s only debt is a $350M credit facility from a small group of lenders led by Eldridge.
Taking a step back, let me be crystal clear: DCG will continue to be a leading builder of the industry and we are committed to our long-term mission of accelerating the development of a better financial system. We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger. DCG has only raised $25M in primary capital and we are pacing to do $800M in revenue this year.
I bought my first bitcoin a decade ago in 2012 and made the decision that I would commit to this industry for the long term. In 2013, we founded the first BTC trading firm – Genesis – and the first BTC fund, which evolved into Grayscale, now the world’s largest digital currency asset manager. Foundry runs the largest bitcoin mining pool in the world and is building tomorrow’s decentralized infrastructure. CoinDesk is the industry’s premier media, data, and events company and they have done phenomenal work covering this crypto winter. Luno is one of the most popular crypto wallets in the world and is an industry leader in the emerging markets. TradeBlock is building a seamless institutional trading platform and as the newest subsidiary, HQ is establishing a life and wealth management platform for digital asset entrepreneurs. Each of these subsidiaries are standalone businesses that are independently managed and are operating as usual. Lastly, with a portfolio of 200+ companies and funds, we’re often the first check for the industry’s best founders.
We appreciate the words of encouragement and support, along with offers to invest in DCG. We will let you know if we decide to do a financing round.
Despite the difficult industry conditions, I am as excited as ever about the potential for cryptocurrencies and blockchain technology over the coming decades and DCG is determined to remain at the forefront.
Tesla Cybertruck body spotted ahead of production start
A Tesla Cybertruck body has been spotted being worked on ahead of the electric pickup truck’s upcoming start of production in Texas.
There are about 1.5 million people interested in the Tesla Cybertruck and they have starved of information for a while.
An update on the production version with final specs and pricing has been expected for the past year, but the automaker has decided to stay quiet about the electric truck, which already had some delays.
When Tesla unveiled the Cybertruck back in 2019, Tesla said that the electric pickup truck would make it to market by the end of 2021. As the deadline was approaching, the automaker confirmed that production slipped to 2022.
CEO Elon Musk later said that Tesla was targeting a start of production for the electric pickup truck in “late 2022” at Gigafactory Texas. With the focus clearly on bringing the Model Y to production at the factory, and that being delayed as well, it appeared likely that the Cybertruck production timeline could also slip.
In March 2022, it was confirmed that Tesla aims to complete Cybertruck development this year for production in 2023, and in June, Musk said that Tesla is aiming for production to start in mid-2023.
In its communications, Tesla has stuck to a mid-2023 timeline over the last few months, and it is starting to become more real than just words with actual production equipment specific to Cybertruck coming to Gigafactory Texas.
Now the image of what appears to be a Tesla Cybertruck body has leaked through the Youtube channel Kim Java without much more information than the image itself:
The image appears to reveal the body of the Cybertruck that we have seen arrived at Gigafactory Texas two months ago.
It shows large casting parts in the back of the truck. It’s hard to tell how many parts make up the entire back of the body since it appears to be partially coated.
The automaker appears to be using both aluminum casted parts and steel for parts of the frame.
Tesla originally talked about the Cybertruck being equipped with an exoskeleton:
Although some dispute Tesla’s use of the word “exoskeleton” since it’s not clear that parts of the external body are structural.
Here’s how Tesla describes it on its website:
Cybertruck is built with an exterior shell made for ultimate durability and passenger protection. Starting with a nearly impenetrable exoskeleton, every component is designed for superior strength and endurance, from Ultra-Hard 30X Cold-Rolled stainless-steel structural skin to Tesla armor glass.
The picture of the body also doesn’t make any external structural parts clear.
Any body-in-white expert out there who wants to share their opinion on the Cybertruck body picture? Let us know in the comment section below.
FTC: We use income earning auto affiliate links. More.
Democratic lawmakers accuse big oil companies of ‘greenwashing’
Gas prices are displayed at an Exxon gas station on July 29, 2022 in Houston, Texas. Exxon and Chevron posted record high earnings during the second quarter of 2022 as energy stocks have faltered in recent months.
Brandon Bell | Getty Images
A pair of Democratic lawmakers on Friday accused the largest oil companies in the United States of “greenwashing” their public image and not doing enough to decarbonize fast enough to meet climate change targets.
Carolyn B. Maloney, chair of the U.S. House of Representatives’ main investigative committee, the Committee on Oversight and Reform, and Ro Khanna, a member of the same committee and the chair of the Oversight Environmental Subcommittee, sent a 31-page letter on Friday to the rest of the members of the committee with the latest findings from their ongoing investigation into the fossil fuel industry.
Burning fossil fuels releases carbon dioxide into the atmosphere and causes global warming. The Oversight Committee began its investigation into what it calls a “climate disinformation” campaign in Sept. 2021 and held a hearing with top executives from oil and gas giants on Oct. 28 of that year.
The letter is the latest installment in the committee’s bid to demonstrate that oil companies are not trying to reduce their CO2 emissions quickly enough, while obscuring their lack of participation.
“These documents demonstrate how the fossil fuel industry ‘greenwashed’ its public image with promises and actions that oil and gas executives knew would not meaningfully reduce emissions, even as the industry moved aggressively to lock in continued fossil fuel production for decades to come — actions that could doom global efforts to prevent catastrophic climate change,” the letter reads.
These efforts are particularly offensive, Maloney and Khanna said, because of the amount of money the biggest oil companies are making right now.
“The fossil fuel industry’s failure to make meaningful investments in a long-term transition to cleaner energy is particularly outrageous in light of the enormous profits these companies are raking in at the expense of consumers — including nearly $100 billion in combined profits for Exxon, Chevron, Shell, and BP in just the last two quarters,” the letter reads.
The letter also details ways in which the oil companies have made insufficient efforts to decarbonize their businesses, and points to internal documents that show how the companies are continuing to invest in fossil fuel production and increase output.
“Each of the companies has publicly pledged to reach ‘net zero’ greenhouse gas emissions by 2050,” the letter reads. “However, experts have found that not one of the net zero pledges from BP, Shell, Exxon, or Chevron are aligned with the pace and scope of cuts necessary to meet the goals of the Paris Agreement and avert catastrophic climate change.”
The letter also points to documents that show how the industry is pushing natural gas as a long-term climate solution.
“In 2021, natural gas contributed to 34% of U.S. energy-related emissions and 22% of emissions globally,” the letter reads. “Documents obtained by the Committee show fossil fuel companies and lobbying groups seek to publicly position natural gas as a clean source of energy and part of the transition to renewables, even as the industry is privately planning for expanded natural gas production over the long term.”
Burning natural gas results in fewer greenhouse gas emissions than burning coal or other kinds of fossil fuels for the same amount of energy, according to the U.S. Energy Information Administration, but it still releases greenhouse gas emissions. Burning natural gas produces about 117 pounds of carbon dioxide per million British thermal units (a measure of heat). That’s compared with 200 pounds for coal and 160 pounds for fuel oil.
Equally critically, the production of natural gas results in leaks of methane all throughout the production process and methane is a greenhouse gas, too. It’s a different greenhouse gas than carbon dioxide, but still contributes to global warming.
The oil companies targeted in this investigation categorically deny the allegations made by the House Committee.
“The Committee’s fourteen month investigation, which included several hours of executive testimony and nearly a half-million pages of documents, failed on all fronts to uncover evidence of a climate disinformation campaign,” Curtis Smith, the media lead for Shell North America, told CNBC. “In fact, the handful of subpoenaed documents the Committee chose to highlight from Shell are evidence of the company’s extensive efforts to set aggressive targets, transform its portfolio and meaningfully participate in the ongoing energy transition.”
Exxon claims the House Committee lawmakers have been disingenuous in their representation of the oil company’s engagement.
“Our CEO has testified under oath on this subject during two all-day Congressional hearings before two separate committees, we’ve been in regular communication with the committee for over a year, and have provided staff with more than one million pages of documents, including board materials and internal communications,” Todd Spitler, corporate media relations senior advisor for Exxon, told CNBC.
“The House Oversight Committee report has sought to misrepresent ExxonMobil’s position on climate science, and its support for effective policy solutions, by recasting well intended, internal policy debates as an attempted company disinformation campaign. If specific members of the committee are so certain they’re right, why did they have to take so many things out of context to prove their point?”
The industry trade group, the American Petroleum Institute, says it is focused on both providing secure sources of energy and addressing climate change at the same time.
“Our industry is focused on continuing to produce affordable, reliable energy while tackling the climate challenge, and any allegations to the contrary are false. The U.S. natural gas and oil industry has contributed to the significant progress the U.S. has made in reducing America’s CO2 emissions to near generational lows with the increased use of natural gas,” Megan Bloomgren, senior vice president of the American Petroleum Institute, told CNBC.
The API also pointed to the industry’s focus on developing carbon capture, utilization and storage (CCUS) and hydrogen technologies.
“We are poised to be a leader in the next generation of low carbon technologies, including CCUS and Hydrogen — technologies widely recognized to be critical to meet the world’s emissions reduction targets. API will continue to work with policymakers on both sides of the aisle for policies that support industry innovation and further the progress we’ve made on emissions reductions,” Bloomgren said.
Chevron declined to comment. In June, Chevron CEO Mike Wirth wrote an open letter to President Joe Biden saying that the oil company had produced the highest volume of oil and gas in its 143-year history in 2021. And Wirth pointed out that carbon emissions associated with segments of its oil and gas production was lower than global averages.
“At roughly 15 kg of CO2-equivalent per barrel, Chevron’s Permian Basin carbon intensity is some two-thirds lower than the global industry average. U.S. Gulf of Mexico production has carbon intensity just a fraction of the global industry average,” Wirth wrote. In the letter Wirth also said the oil company was investing $10 billion to reduce greenhouse gas emissions, scale carbon capture and hydrogen technologies, and grow its renewable liquid fuels production.
BP did not immediately respond to an email seeking comment.
GM’s Ultium battery plant votes overwhelmingly to unionize with UAW
GM’s first Ultium battery plant in Lordstown, Ohio has voted to join the United Auto Workers, with 98% of workers voting in favor of union representation.
Ultium is GM’s battery joint venture with LG Energy. GM will establish at least four factories in the US to build the batteries for their upcoming EVs. Just today, GM announced an additional $275 million investment in the second plant in Spring Hill, Tennessee.
The Lordstown/Warren plant in Ohio is already up and running, though, and producing batteries for GM’s current and upcoming EVs. The Hummer EV already uses Ultium batteries, and the Ultium-powered Equinox, Blazer, Silverado and Cadillac Lyriq are all expected in the next year. GM’s other current EV, the Chevy Bolt – which we just named Electrek’s EV of the year – does not use Ultium cells as it came out before Ultium was developed.
While US companies have largely relied on foreign-supplied batteries until now, the recently-passed Inflation Reduction Act included measures to encourage onshoring of US EV production, which has led several companies to announce battery factories in the US. An early draft of the bill included an additional tax credit for union-built EVs, but that credit didn’t make it to the final bill.
Labor has been experiencing somewhat of a renaissance in the US in the past year or two, as COVID-related supply disruptions and general levels of discontent among the populace have led workers to demand better treatment from employers. Several industries have seen surges in unionization efforts, which have also been aided by pro-union comments from President Joe Biden.
But US battery production has heretofore mainly been non-unionized, as the largest US battery producer, Tesla, does not have a union either for battery manufacturing or for auto production. There have been a few spurts of unionization efforts at Tesla’s plants, though they met retaliation from Tesla CEO Elon Musk and were not successful.
So today’s union vote at GM’s first battery plant was closely watched, as it could set the tone not only for GM’s electrification efforts, but labor in the US battery supply industry as a whole. A positive vote was expected, though perhaps not as near-unanimous as today’s 98% result.
UAW is eyeing battery factories as the industry transitions to electric vehicles, which have fewer parts and take less labor to build than traditional gas vehicles. This would lead to fewer workers required to build cars, though targeting battery workers could help buoy union membership.
The UAW released a short statement about the vote, stating:
Our entire union welcomes our latest members from Ultium. As the auto industry transitions to electric vehicles, new workers entering the auto sector at plants like Ultium are thinking about their value and worth. This vote shows that they want to be a part of maintaining the high standards and wages that UAW members have built in the auto industry.
Ray Curry, UAW President
One potential sticking point in today’s union deal relates to pay. Previously, GM has held the position that battery suppliers should command similar pay to other auto supply factories, around $20/hr, which is what Ultium hourly workers currently make. But mainline auto workers can be paid closer to $30/hour, and battery workers may argue that due to how integral the battery is to an EV, that they should be paid closer to final assembly line workers.
FTC: We use income earning auto affiliate links. More.
Sports1 year ago
Team Europe easily wins 4th straight Laver Cup
Politics1 year ago
Yvette Cooper promoted and Lisa Nandy to shadow Gove on levelling up brief in Labour reshuffle
Politics1 year ago
Have the last few wobbly weeks seen a turning point for Johnson as PM?
Politics1 year ago
Govt minister says she ‘doesn’t believe’ Stanley Johnson inappropriately touched MP
Environment1 year ago
Sprinting Into An Integrated Cleantech Future
Business2 months ago
Chancellor Kwasi Kwarteng insists government ‘protecting people across UK’ with mini-budget announcement
Business2 months ago
Liz Truss’s ‘favourite’ economist says chancellor ‘took his eye off ball’ and ‘overstepped the mark’ with mini-budget
Politics1 year ago
‘It’s going to be a great Christmas’: Defiant Javid defends not imposing stricter restrictions to combat new variant