{"id":93514,"date":"2023-08-16T07:47:53","date_gmt":"2023-08-16T07:47:53","guid":{"rendered":"https:\/\/www.techopedia.com"},"modified":"2023-10-26T09:55:54","modified_gmt":"2023-10-26T09:55:54","slug":"coindesk-layoffs-a-victim-of-crypto-winter-or-a-sign-of-broader-trouble-in-the-journalism-industry","status":"publish","type":"post","link":"https:\/\/www.techopedia.com\/coindesk-layoffs-a-victim-of-crypto-winter-or-a-sign-of-broader-trouble-in-the-journalism-industry","title":{"rendered":"Coindesk Layoffs: A Victim of Crypto Winter, or Broader Trouble in the Journalism Industry?"},"content":{"rendered":"

The rumors that crypto news site CoinDesk is laying off 45% of its editorial staff is a timely reminder that all is not well in the journalism industry.<\/span><\/p>\n

As traditional media fights in a new fragmented landscape of news sources, and battles for attention against a whole wave of services seeking your time (everything from streaming to social media<\/a>), gone are the days of a newspaper dropping through your door each morning.<\/span><\/p>\n

Add to that the departure of advertising revenue as marketing budgets primarily move online and the emergence of <\/span>artificial intelligence<\/a> (AI). It is a strange time to be a journalist in 2023.<\/span><\/p>\n

While CoinDesk cutting back its editorial staff may be a victim of the above factors, its cost-cutting moves may have plenty to say about the state of the cryptocurrency market<\/a> right now, including the knock-on effects from the crypto scandals of 2022<\/a>\u00a0and a troubled few years for its parent company.<\/p>\n

Why Is CoinDesk Cutting Its Editorial Staff?<\/span><\/h2>\n

CoinDesk is getting lean<\/a> as the company gears for a new chapter. The popular crypto news site is cutting staff as it nears a deal to be sold for a reported $125 million.<\/span><\/p>\n

Internal emails seen by the press indicate that the layoffs were a “required step” to raise funds for its parent company Digital Currency Group (DCG).<\/span><\/p>\n

DCG is a crypto conglomerate that owns asset manager Greyscale Investments, bitcoin<\/a> (BTC) miner Foundry, news agency CoinDesk, and the bankrupt crypto lender Genesis Capital.\u00a0<\/span><\/p>\n

DCG has been rocked by the crypto winter<\/a>. The company had to shut down its wealth management unit HQ and its institutional brokerage TradeBlock in 2023. At the same time, its lending arm Genesis Capital filed for bankruptcy in January 2023 with over $3.5 billion due to its creditors.<\/span><\/p>\n

What’s putting the pressure on DCG is the Gemini Earn program, a crypto lending crypto that Genesis introduced to crypto exchange Gemini’s customers. According to the bankruptcy filings, about $800 million is owed to the customers of the program by Genesis<\/a>.<\/span><\/p>\n

Coindesk Layoffs Explained: How Did DCG Get Here?<\/span><\/h2>\n

Cast your mind back to May 2022, and the implosion of the Terra ecosystem was the first domino that would ultimately lead to the collapse of Genesis Capital.<\/span><\/p>\n

Soon after, Singapore-based crypto hedge fund Three Arrows Capital (3AC), which had suffered heavy market losses from the Terra collapse, filed for bankruptcy after failing to pay back its creditors.<\/span><\/p>\n

Genesis was among the top 3AC creditors, lending about $2.36 billion to the hedge fund.<\/span><\/p>\n

While Genesis managed to recover half the amount through collaterals, the remaining $1.2 billion still remained unpaid. At the time, parent company DCG had stepped in to save Genesis, assuming the 3AC risk and replacing it with a $1.1 billion promissory note to Genesis.<\/span><\/p>\n

The situation took a turn for the worse when the popular crypto exchange FTX collapsed in late 2022. Fearful Gemini Earn customers – who had lent their crypto to Genesis \u2013 began frantically closing their loans, causing a bank run on DCG’s lending unit.<\/span><\/p>\n

When Genesis could not fulfill the loan repayments, the company filed for bankruptcy in January 2023.<\/span><\/p>\n

In May 2023, crypto exchange Gemini filed a <\/span>claim<\/span><\/a> of over $1.1 billion of cryptocurrencies on behalf of Gemini Earn customers. At the center of the claim lies DCG’s promissory note to Genesis.<\/span><\/p>\n

A new lawsuit filed in July 2023 accused DCG of misrepresenting the solvency of Genesis by writing a “sham” promissory note to Genesis.<\/span><\/p>\n

\n

5\/ It's now clear this was a carefully crafted lie. DCG didn\u2019t absorb any losses or provide real capital. Behind the scenes, DCG wrote Genesis a sham 10yr promissory note w\/ a measly 1% interest rate \u2013 worth just a fraction of its $1.1b face amount. Genesis was wildly insolvent. pic.twitter.com\/RBsf7QmGoZ<\/a><\/p>\n

— Cameron Winklevoss (@cameron) July 7, 2023<\/a><\/p><\/blockquote>\n