Digital Currency Group’s big revenue gains are clouded by claims of a $3B fraud
Stackin’ satoshis… In a leaked letter to investors, crypto colossus Digital Currency Group said that last quarter it scored a nearly 60% surge in year-over-year revenue. While the venture-capital company isn’t a household name, it touches almost every piece of the crypto ecosystem. DCG has invested in 100+ crypto-focused startups in fields including metaverse games, NFT collectables, bitcoin scaling, and stablecoins. Driving the rev pop:
Winter’s thaw: The crypto market has staged a comeback (bitcoin’s price passed $50K yesterday for the first time in years) and the rising tide has lifted DCG’s boat.
ET-Yes: DCG said revenues at its subsidiary, Grayscale, which operates the largest spot bitcoin ETF, were up 25% quarter over quarter. ICYMI: the SEC recently approved spot bitcoin ETFs, which let investors get exposure to BTC’s price without owning it.
Trouble in paradise… it’s not all sunshine and revenues in DCG land. The New York attorney general sued the crypto VC in October over fraud allegations, and on Friday the AG filed a multibillion-dollar update to the state’s civil case. The allegation: DCG defrauded 230K investors out of $3B, up from an initial $1B claim. At issue: DCG’s troubled crypto-lending subsidiary, Genesis, which got entangled with the Winklevoss twins’ Gemini Earn program that promised customers up to 8% interest on crypto lending. That all blew up when TerraUSD imploded, vaporizing billions in investor value and setting off a chain reaction that helped kickstart crypto winter.
You gotta watch out for rotten apples… especially if you’re the barrel. DCG’s sprawling investments and subsidiaries expose the VC to crypto’s ups and downs — both financial and reputational. DCG called the NY attorney general’s complaint “baseless” and said it would fight it in court. But Genesis’ bankruptcy early last year and the ongoing civil case still loomed large in DCG’s latest investor letter.