Following massive losses at Three Arrows Capital (3AC), two top executives from crypto trading and investment companies Genesis Trading and Galaxy Digital are setting up a new cryptocurrency fund. They are seeking to raise $500 million, according to a recent filing from the Securities and Exchange Commission (SEC).
Firms Seek To rise From 3AC Debris.
The filing reveals that DBA Crypto Fund I LP is the body issuing the fund and has some big names in the top leadership positions within the crypto space. The fund lists the Michael Jordan – Galaxy Digital’s head of investment, Joshua Lim – Genesis’s head of derivatives, and Roshum Patel – Genesis’s vice president of trading, as general partners. Shane Barratt – founder and CEO of Convex Trading, is named as managing and investment partner. Patel left Genesis in March 2022, according to his LinkedIn profile.
Both Galaxy Digital and Genesis have experienced immense losses in the past months. According to Galaxy Digital’s quarterly report, the firm recorded losses amounting to $544 million in Q2/2022 due to what it refers to as “unfavorable outcomes from the investments in its trading, digital assets, and principal investment businesses.”
Similarly, Genesis trading reported that its lending originated at $40.4 billion in Q2/2022, down 9% from the previous quarter’s $44.3 billion. Derivatives traded were worth $26.6 billion in notional value during the second quarter, down 4% from quarter 1. Genesis’s headcount decreased 20% over the quarter to just about 166 employees across multiple time zones on three continents.
Genesis attributes its losses, deteriorating performance, and reduced workforce to market conditions which it claims “contributed to a 66% drop in active loans outstanding to $4.9 billion from $14.6 billion in Q1.”
“Despite challenging market conditions, we are proud of the dedication and integrity of the entire Genesis team. We look forward to working alongside our clients as crypto capital markets evolve.”
However, the market conditions Genesis Trading refers to in its report were occasioned by the collapse of Terra’s UST and its sister token, LUNA. This led to a snowball of events, including the downfall of 3AC, one of the world’s most significant crypto hedge funds, that dragged down many crypto companies and investors.
On July 6, Genesis Trading confirmed exposure to the defunct hedge fund 3AC attesting that it lent the firm to the tune of $2.36 billion. Genesis’s parent company, Digital Currency Group (DCG), agreed to take on the venture’s liabilities and filed a claim of $1.2 billion against Three Arrows Capital.
As the 3AC fiasco continued to unravel, a list of creditors emerged online, and Galaxy Digital was found to be amongst the claimants (Cryptoslate). Apart from the losses posted by the firm in its recent quarterly report, it also pulled out of a high-profile acquisition agreement with the crypto custodian BitGo (the Block).
The new fund is seen as an attempt by the two crypto investment companies to recover from the crypto market downturn as they prepare for the next phase of the cryptocurrency space. Other measures taken toward the same goal include the recent shuffling of top leadership, with Michael Moro resigning as the CEO of Genesis Trading on August 17 after six years at the company’s helm. Dear Islam, the firm’s chief operating officer (COO) has been appointed interim CEO.
Genesis and Galaxy Digital have yet to release any official statements regarding the fund.