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After Exposing FTX, DCG’s CoinDesk Might Be Bought Out

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CoinDesk has received takeover interest just one month after its FTX exposé, which crippled an already troubled crypto industry through widespread contagion.

According to Samfor, CoinDesk was offered US$300 million but the price was considered too low. The crypto news site earns US$50 million in annual revenue from advertising and its Consensus conference.

CoinDesk is backed by Digital Currency Group (DCG), which is facing its own financial woes as a result of the FTX fallout induced contagion.

As well as CoinDesk, DCG also owns Genesis, Grayscale, Foundry and Luno. Genesis has around $175m of derivatives locked up in FTX, triggering concerns that it could face bankruptcy.

Last week DCG CEO Barry Silbert reassured the industry that “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” but concerns are still looming.

DCG was thought to have injected US$140 million into Genesis the frozen FTX funds but rumours suggest that DCG did not fund that bailout but rather gave Genesis Capital a promissory note. Now the bill is coming due and they are struggling to raise funds.

Read more – DCG: Et Tu, Barre

From a leaked DCG shareholder letter we know 5 important things:

  • DCG owes Genesis US$ 1.1 billion in about 10 years
  • DCG owes Genesis US$ 585 million in about one year
  • DCG has drawn US$350 million on a US$600 million secured credit facility
  • DCG was borrowing from Genesis to fund stock buybacks and other investments
  • DCG is “pacing” to do about US$800 million in revenue in 2022

Grayscale is also under scrutiny as its flagship fund Grayscale Bitcoin Trust (GBTC) is trading at a 45% discount. What’s more, the firm will not share its proof of reserves.

“Due to security concerns, we do not make such on-chain wallet information and confirmation data publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure,” Grayscale stated.

Read more – Can DCG Escape A Potential Creditor Siege?

Blockhead writer Jon Reiter had suggested DCG could sell Grayscale to stay afloat. “The simplest route is simply to try to sell Grayscale and their GBTC position to cover the debts. This is not an insane idea. It is possible someone wants to spend US$1.5 billion or more to acquire Grayscale,” he wrote.

But perhaps CoinDesk might now be the first to go. As Samfor explains, CoinDesk funds their businesses with revenue from advertisers and events but “the pool of both is shrinking fast.”

Its Consensus 2022 conference, which attracted 17,000 attendees in Austin, is CoinDesk’s flagship event. On Cyber Monday, CoinDesk was offering a “buy one get two free” deal for next year’s conference.

Given the state of DCG, Silbert will likely seriously consider letting one of his firms go. Whether it’s letting Genesis go bankrupt or selling off CoinDesk (or Grayscale) is yet to be seen. Nonetheless, the irony of CoinDesk pushing the first domino and collapsing the house of cards only for the consequences to return to it is rather amusing.