DCG Closes its Wealth Management Arm, HQ Digital

After so many financial woes, cryptocurrency empire Digital Currency Group has announced that it is shutting down one of its wealth management firms identified as HQ Digital. According to the news site The Information, HQ Digital has already stopped its operation since the 2nd of January, although DCG plans to continue the project at a later date.

“Due to the state of the broader economic environment and prolonged crypto winter presenting significant headwinds to the industry, we made the decision to wind down HQ,” the company said, “We’re proud of the work that the team has done and look forward to potentially revisiting the project in the future.”

Before suspending its operations, HQ Digital under the leadership of former Figure co-founder Alana Ackerson had up to $3.5 billion in assets under management (AUM). These are funds owned by crypto entrepreneurs and investors. 

This closure is one of the many challenges which DCG has faced, especially since the collapse of Bahamian-headquartered crypto exchange FTX.

DCG Subsidiaries and its Financial Strain

One of its subsidiaries, Genesis Global Trading halted withdrawal and lending on its platform in the wake of the FTX implosion. Based on a published statement by Genesis, the company noticed that users were initiating outrageous withdrawals which were too high for its current cash flow after the liquidity crunch of FTX, hence the decision to suspend all withdrawal transactions.

Shortly after, Genesis Global Trading’s balance sheet revealed that it had an outstanding loan of almost $3 billion. Markedly, a large percentage of that amount was owed by its parent company Digital Currency Group which claimed to have used it to “fund investment opportunities and to repurchase DGC stock from non-employee shareholders in secondary transactions previously highlighted in quarterly shareholder updates.”

Currently, Genesis is trying to secure funds to solve its liquidity problems and resume withdrawal once again. “We believe we can arrive at a solution,” Derar Islim, the interim Chief Executive Officer (CEO) said “While we are committed to moving as quickly as possible, this is a very complex process that will take some additional time. We will continue to give you updates on meaningful developments, including any updates on timing.”

Grayscale, another DCG subsidiary had its Ethereum (ETH) Trust (ETHE) fund plunged by almost 60%. This was allegedly influenced by the DCG’s $1.675 million debt to Genesis Global Trading and Winklevoss brothers’ firm Gemini Exchange.