Key Takeaways:
Genesis filed two lawsuits against DCG and Barry Silbert seeking recovery of over $3.2 billion. The Delaware suit alleges reckless management and misrepresentation of Genesis’ financial health. The New York bankruptcy suit outlines $1B+ in alleged fraudulent transfers to DCG and affiliates.Crypto lending platform Genesis Global has launched a legal offensive against its parent company, Digital Currency Group (DCG), and CEO Barry Silbert, accusing them of engineering a series of insider transactions that ultimately drove the firm into bankruptcy.
In a complaint filed in the Delaware Court of Chancery, Genesis said Silbert and his associates of “recklessly operated, exploited, and then bankrupted” the crypto lender through self-dealing and misleading financial disclosures, according to a Monday announcement.
The lawsuit alleges that Silbert misrepresented Genesis’s financial health to enrich himself, DCG, and Grayscale Investments. Although Grayscale is referenced, it is not named as a defendant.
Genesis Seeks $2.2 Billon
Genesis is seeking to recover at least $2.2 billion in Bitcoin, Ethereum, and other crypto assets through the Delaware suit, with the goal of redistributing the recovered funds to creditors still awaiting payment.
A second lawsuit, filed in the U.S. Bankruptcy Court for the Southern District of New York, focuses on over $1 billion in allegedly fraudulent fiat and crypto transfers.
These transactions include eight transfers totaling roughly $450 million to DCG, as well as more than $297 million in crypto assets sent to DCG International.
Another $34 million was paid to DCG in what Genesis now claims were bogus tax-related payments.
According to court filings, these transfers took place as Genesis was facing severe liquidity stress triggered by the 2022 collapse of Terra-Luna and the broader market downturn.
However, the filings also reveal that Genesis was already insolvent by the end of 2021, burdened by $14 billion in outstanding loans.
“Genesis faced extraordinary systemic risk and had virtually no internal controls to mitigate that risk,” the New York complaint states.
DSG Was Warned by as Early as 2021
The filing further reveals that DCG was warned as early as November 2021 by consulting firm Oliver Wyman about Genesis’s financial vulnerabilities but failed to act.
The financial troubles of Genesis began with the collapse of 3AC, which triggered liquidity issues, and worsened with the implosion of FTX later that year.
In January 2023, Genesis filed for Chapter 11 bankruptcy, disclosing over $3.5 billion in debts to its top 50 creditors, including major names like Gemini and VanEck.
Following court approval, the company finalized its restructuring plan in August 2024 and has since started returning over $4 billion in assets to its creditors.
Earlier this year, the Securities and Exchange Commission (SEC) announced enforcement actions against DCG and Genesis, citing violations of securities laws.
The SEC accused DCG and Genesis of defrauding investors through misrepresentation, resulting in penalties and legal action. DCG agreed to settle the charges by paying a $38 million fine.
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