By Tom Wilson and Hannah Lang
(Reuters) – As an investment banker, Barry Silbert worked on some of the highest-profile corporate failures. Now, as founder of venture capital firm Digital Currency Group, parent of troubled crypto firm Genesis, he is grappling with problems closer to home.
Silbert, 46, cut his teeth on bankruptcies including Enron’s and WorldCom’s when working at California-based investment bank Houlihan Lokey. “The experience working on complex, problematic restructurings proved invaluable,” he told the U.S. Senate Banking Committee in 2011.
Genesis Global Capital, one of the world’s biggest crypto lending firms, filed for U.S. bankruptcy protection on Thursday owing creditors at least $3.4 billion, the latest in a string of major corporate failures in the digital asset industry sparked by the 2022 rout in crypto prices. It plans to exit the bankruptcy by May 19, filings showed on Friday.
Genesis, which brokers crypto for financial institutions like hedge funds and asset managers, had frozen client withdrawals in its lending unit in November, citing an “extreme market dislocation and loss of industry confidence” following the downfall of major cryptocurrency exchange FTX.
Its two biggest borrowers were Three Arrows Capital, the Singapore hedge fund that went bankrupt in July, and Alameda Research, the hedge fund of FTX founder Sam Bankman-Fried that is also in bankruptcy proceedings, Reuters reported this month.
The troubles at Genesis are a blow to Silbert and his ambition, described to Reuters in a 2017 interview, that DCG would one day become a publicly traded conglomerate akin to Warren Buffett’s Berkshire Hathaway.
DCG did not immediately respond to a request for comment.
EARLY ADOPTER
Silbert, who grew up in Maryland, was an early bitcoin adopter.
He told Reuters in the 2017 interview that he bought about $175,000 worth of the cryptocurrency in 2012, paying about $11 a coin at a time when bitcoin was little known beyond niche internet blogs.
Silbert went on to launch Digital Currency Group in New York in 2015, later moving the firm to Connecticut.
As crypto markets soared in value, DCG raised money from the venture capital arm of Bain Capital, MasterCard, New York Life Insurance Company, and Canadian bank CIBC.
Bain Capital declined to comment while the other firms did not respond to requests for comment.
DCG built up a formidable portfolio of companies – over 200 in more than 35 countries Silbert told shareholders this month – from Genesis and crypto news and events site CoinDesk to New York-based Grayscale, a major digital asset manager.
It has also invested in more than 50 crypto funds and other related projects, Silbert said.
Unlike other prominent crypto moguls, Silbert kept a relatively low profile, eschewing the regular tweets favored by his peers. He was also deeply embedded in the world of financial trading even before the advent of cryptocurrencies.
In 2004, he founded Restricted Stock Partners, a trading platform for restricted securities issued by companies as part of private deals. The company expanded and changed its name in 2008 to SecondMarket and by 2011 had facilitated billions in private market transactions, according to Forbes.
Nasdaq bought SecondMarket in 2015 for an undisclosed amount and Silbert relaunched SecondMarket’s crypto trading division as Genesis Trading the same year, incorporating it into his growing crypto empire.
Silbert’s current worth is unclear but Forbes pegged it last year at $3.2 billion.
Silbert has come under fire since Genesis suspended withdrawals, with the co-founder of crypto exchange Gemini accusing him of misleading investors and engaging in bad-faith stall tactics. Gemini offered a crypto yield product in partnership with Genesis, and says Genesis owes the firm $900 million.
Genesis declined to comment. A spokesperson earlier this month expressed disappointment that Gemini was “waging a public media campaign despite ongoing productive private dialogue between the parties.”
In an open letter posted to Twitter on Jan. 10, Gemini’s Cameron Winklevoss demanded the DCG board remove Silbert as CEO and install a new leader.
“He has proven himself unfit to run DCG and unwilling and unable to find a resolution with creditors that is both fair and reasonable,” the letter said.
In a letter to shareholders, also dated Jan. 10, Silbert called the past year the most difficult of his life.
“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,” he said.
(Reporting by Tom Wilson in London and Hannah Lang in Washington; editing by Megan Davies, Kirsten Donovan)
