Digital Currency Group, a venture capital business with stakes in over 200 crypto projects, declared a payout freeze while one of its companies is in financial trouble.
Digital Currency Group (DCG) has informed shareholders that it would suspend quarterly dividend payments until further notice in order to preserve liquidity.
The company is focused on “strengthening our balance sheet by decreasing operating expenses and conserving liquidity,” according to a statement delivered to shareholders on Jan. 17.
Its financial problems stem from the troubles of its subsidiary, crypto broker Genesis Global Trading, which reportedly owes creditors more than $3 billion, and DCG is also considering selling some of its portfolio holdings.
Customers are currently unable to withdraw funds from Genesis after the exchange halted withdrawals on Nov. 16, prompting Cameron Winklevoss to call for the board of DCG to remove Barry Silbert as CEO of the firm in a Jan. 10 open letter on behalf of his exchange Gemini and its users with funds on Genesis.
Genesis owes Gemini $900 million, according to Winklevoss, for monies provided to Genesis as part of Gemini’s Earn programme, which allows consumers to earn an annual yield of up to 7.4%. He also claimed DCG owed Genesis $1.675 billion, which DCG CEO Barry Silbert rejected.
Soon after, on January 12, the US Securities and Exchange Commission (SEC) fueled the fire by charging both corporations with marketing unregistered securities through the Earn programme.
Genesis’ issues first surfaced on Nov. 16, when it froze customer withdrawals in the aftermath of the FTX debacle, citing “extraordinary market turbulence” that resulted in “abnormal” withdrawal levels.
Genesis announced on Nov. 10, less than a week earlier, that it had roughly $175 million trapped on FTX, prompting DCG to send Genesis an emergency equity infusion of $140 million in an attempt to resolve its liquidity concerns.
DCG also controls Grayscale Investments and its digital asset trusts, and has invested in over 200 crypto firms, including well-known brands like blockchain analysis firm Chainalysis, stablecoin issuer Circle, and digital asset exchange Kraken.
DCG was contacted for comment by Cointelegraph but did not respond.