DCG will become ‘an insolvent zombie company,’ Ahluwalia says 

The “root lesson to be learned,” Ahluwalia says, is “not to borrow from Genesis to go levered long on your own product”


Nomad_Soul/Shutterstock modified by Blockworks


Any time a CEO says “our balance sheet is strong” in crypto, jokes Santiago Santos, “it’s definitely not. Run away.”

Following the collapse of FTX, DCG’s CEO Barry Silbert attempted to reassure frazzled investors with a calming letter, suggesting things were copacetic despite the spreading market contagion. But Lumida Wealth co-founder and CEO Ram Ahluwalia says “things still didn’t make any sense” at the time.

“And now, of course, here we are,” he says. “The NYAG has filed a complaint against DCG and Barry Silbert personally.”

Speaking to Blockworks on the Empire podcast (Spotify/Apple), Ahluwalia says the digital asset conglomerate is now mired in a legal mess with serious implications, comparing the meltdown of DCG to the Enron scandal of the early 2000’s.

Read more: New York AG sues DCG, Gemini and Genesis in ‘sweeping lawsuit’

After the demise of Three Arrows Capital left DCG subsidiary Genesis in a negative equity position, the best move would have been to “let Genesis default and go into bankruptcy,” he says.

“But here’s what we learned in the NYAG complaint,” he says. “Barry [Silbert] himself was personally directing Genesis to refinance its loans,” according to Ahluwalia.

The lesson to be learned

Ahluwalia alleges that DCG did not let Genesis go into bankruptcy to “protect the mothership” because “Genesis would have called in the loans and not refinanced DCG — and DCG didn’t have the cash.”

The “root lesson to be learned,” Ahluwalia says, is “not to borrow from Genesis to go levered long on your own product.”

“That’s what the NYAG complaint shows,” he says, “that Barry Silbert personally directed Genesis to refinance its loans — and he set loan terms. That’s self-dealing.”

Ahluwalia says the legal issues at play are arguably worse than those of the infamous Enron scandal. While Enron was guilty of “self-dealing,” he says, “each one-off transaction was legal on the surface. It was the aggregation of all of that together, plus the intention to deceive that made that fraud.”

“What DCG did was beyond that,” he says. For example, the company “allegedly issued fraudulent balance sheet statements via Genesis to their customers. Enron didn’t do that.” DCG also hid accounting issues behind “technical word salad” and a $1.1 billion promissory note, he says.

Read more: DCG’s Barry Silbert is dodging the hard questions, sources say

According to Ahluwalia, Genesis and DCG “crossed a line in that deception, in a way that Enron did not.”

Enron “cost the public a lot more money,” Ahluwalia admits, but “in terms of the brazenness of it, it was more serious,” he says.

A zombie company

In the aftermath, Grayscale will likely be auctioned off, Ahluwalia suggests, due to the New York AG’s request that DCG be prohibited from acting as a securities and commodities business. He also expects DCG to be “mired in endless settlements and lawsuits.”

The conglomerate will effectively become “an insolvent zombie company,” he says. “They will never be able to raise venture capital.” 

The company may likely persist in the form of “indentured servitude” to its creditors, Ahluwalia suggests. In the meantime, Grayscale might serve as a “cash cow” with DCG “leeching the cash flow off of Grayscale to make creditors whole,” he says.

“When that’s done, then the assets of DCG are auctioned off — and DCG is functionally dead.”

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png


Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.



As part of the #Breakout2024 plans, Radix has introduced Token Trek


House members ask Gensler to keep a “consistent and equitable approach” with ether ETF proposals after the agency approved spot bitcoin ETFs in January


Using old-world instruments to address crypto user experience challenges goes against what this industry set out to do


And, weeks of a potential crypto ETF decision are no stranger to chaos


The FIT21 Act marks the second crypto-focused piece of legislation to advance in Congress this month


More than half of Solana transactions fail