Genesis Sues DCG and Barry Silbert for $3.3 Billion in Fraud and Abuse
Date: 2025-05-21 Author: Gabriel Deangelo Categories: BUSINESS
Cryptocurrency company Genesis, which is in bankruptcy proceedings, has initiated two lawsuits at once against its parent company Digital Currency Group (DCG) and its founder Barry Silbert. The total amount of claims is $3.3 billion. These lawsuits were filed in Delaware and New York courts and concern allegations of fraud, abuse of power, and intentional infliction of financial damage.
According to documents filed in the Delaware Chancery Court, DCG management allegedly treated Genesis as its own "wallet", using the company to finance operations under the guise of sustainability. The accusations are directed not only at Silbert, but also at other key managers of the holding, who, according to the plaintiffs, ignored risks and carried out questionable transactions. This allegedly allowed DCG and its affiliate Grayscale Investments to benefit at the expense of Genesis' creditors.
Genesis is seeking the return of $2.1 billion in crypto assets in kind. The lawsuit states that Silbert portrayed himself as a stable crypto lender while the company was in fact insolvent. When the situation worsened, DCG provided Genesis with a $1.1 billion promissory note, which, it is claimed, did not solve the liquidity problem, but merely masked the asset shortfall. The note was not payable for the next 10 years, which did not provide the company with the financial support it needed.
The second lawsuit was filed in the Bankruptcy Court for the Southern District of New York. The LOC committee, which represents the interests of creditors, is demanding that DCG and Barry Silbert personally reimburse another $1.2 billion. These funds, according to the plaintiffs, were withdrawn from Genesis 12 months before the bankruptcy filing, while the management was already aware of the company's dire financial situation.
Genesis also accuses Silbert and his colleagues of trying to mislead investors through fictitious transactions, as well as securing loans with assets that were illiquid at the time of the transactions - we are talking about shares in GBTC, a product from Grayscale Investments.
Recall that Genesis filed for bankruptcy in January 2023. Later, it, along with DCG and its management, became a defendant in a class action lawsuit for the sale of unregistered securities. Some of the assets have already been returned to creditors, including income from the sale of GBTC shares. In August 2024, the company began the process of compensating losses to affected customers.
