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News in a Glimpse:

  • The US-based Digital Currency Group and its subsidiaries are allegedly holding nearly $300 million in funds and assets that Bitvavo has stated they are working to recover. The funds were lent to Genesis Global Capital, a subsidiary of the Digital Currency Group, in order to provide Bitvavo’s own customers with a product in which they received interest on their cryptocurrency tokens.

Bitvavo, a Dutch cryptocurrency exchange, claims to have $300 million, or approximately 17.5% of the $1.6 billion in deposits and other assets it manages, locked up in the Digital Currency Group. The respective exchange platform has assured their customers that the aforementioned situation “has no impact on the Bitvavo platform.”

The said crypto exchange platform claimed in a blog post that Digital Currency Group is experiencing liquidity issues, citing the current turbulence in the cryptomarket as the reason. According to the blog, the Digital Currency Group has also suspended repayments until the liquidity issue is resolved.

The Digital Currency Group, on the other hand, claims that their funds are currently held by its “independent subsidiary,” Genesis. However, Bitvavo retorted, “We hold Digital Currency Group responsible for the inaccessible funds.” The Digital Currency Group is one of the crypto world’s largest and best-known crypto firms, owning Genesis, Grayscale, CoinDesk, Foundry, and Luno.

The month that followed the demise of Sam Bnakman-crypto Fried’s empire — FTX — was not kind to the Digital Currency Group. In which case, Genesis has already frozen withdrawals from its lending arm and has yet to unfreeze them. In this regard, Gemini, which is known to be owned by the Winklevoss brothers, has already halted redemptions on its Earn product, in which Genesis is a partner. Genesis is said to owe Gemini Earn users $900 million.

This Genesis issue has shaken the foundations of Digital Currency Group’s finances. Before the month of November ended, a representative from the Digital Currency Group claimed that they owed Genesis $575 million, claiming that they were able to surpass previous crypto winters and are expecting to come out even stronger this time. However, the Financial Times reported in early December that DCG owes Genesis $1.7 billion.

Grayscale Capital is also in trouble, as the New York hedge fund Fir Tree Capital Management filed a lawsuit against the company. Grayscale Bitcoin Trust (GBTC) was accused of “potential mismanagement and conflicts of interest,” according to the lawsuit.

Will Clemente, co-founder of Reflexivity Research, tweeted last week about the aggressive selloff in the last 48 hours of many cryptocurrencies associated with Digital Currency Group, speculating that it could be Digital Currency Group looking for liquidity. Filecoin and Flow, both of which are linked to Digital Currency Group, have already lost 20% and 10% in the last 24 hours.

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Bitvavo’s Move

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Bitvavo, a Dutch cryptocurrency exchange, stated that they are working to recover nearly $300 million in funds and assets held by the US-based Digital Currency Group and its subsidiaries. In which the exchange platform claimed to have lent money to the Digital Currency Group’s subsidiary, Genesis Global Capital, in order to provide Bitvavo’s own customers with a product in which they received interest on their cryptocurrency tokens.

In light of the FTX’s fall, Genesis has also frozen its withdrawals. The announcement was made via a letter to its respective clients, who were also informed that they were already working on a plan to preserve assets. Bitvavo also claimed that they have enough funds to cover the assets for their own customers. They are still expecting reimbursement. The exchange platform also stated that their customers were not at risk and could withdraw their entire balance at any time.

According to a Digital Currency Group representative, the accounts in question were held at Genesis, not at Digital Currency Group itself. Genesis is an “independent subsidiary,” according to the representative. Bitvavo’s representative, on the other hand, claimed that, despite the circumstances, the Digital Currency Group is still responsible for the inaccessible funds.

Bitvavo’s Plan Towards Recovering Fund

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Bitvavo has already shared a detailed plan for recovering the nearly $300 million in funds and assets that have become encumbered on the US-based Digital Currency Group and its subsidiaries. This is the latest in the ongoing crypto industry meltdown following the fall of the once-mighty crypto empire — FTX.

Several questions and speculations have been raised about Bitvavo’s ability to recoup the loan offered to the Digital Currency Group subsidiary in the aftermath of the FTX collapse, which was followed by several crypto crashes. In which the respective platform has assured its customers that the frozen Genesis withdrawals will not have an impact on the platform.

In a blog post, the platform stated that the Digital Currency Group’s situation has no direct impact on the services that they provide. Because of the drop in FTX, several crypto firms have frozen withdrawals in order to avoid liquidity issues. Genesis is one of those who have chosen to freeze their withdrawals, leaving Bitvavo with no choice but to immediately recover the loan.

Although Bitvavo is attempting to recover its frozen funds and assets on the Digital Currency Group, it is also reassuring their customers that they are financially sound. The platform then claimed to have generated €173 million in 2021 and €250 million in profits to date in 2022.

In a blog post, they claimed that they were able to accumulate substantial reserves in order to realize its international growth ambitions. According to the news article, Bitvavo’s founder, Mark Nuvelstijn, and two other co-founders are assisting financially. In which the founder stated that they will pay the customers’ money even if they are unable to recover funds from the Digital Group Currency.

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