Crypto
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- The Genesis Litigation Oversight Committee has filed two lawsuits against Digital Currency Group and CEO Barry Silbert
- The suits allege misuse of Genesis’s assets, fraudulent transfers, and breach of fiduciary duty
- Genesis creditors are seeking over $3.1 billion in recovery, including cryptocurrency assets and a $1.1 billion promissory note
The recently formed Genesis Litigation Oversight Committee (LOC) has initiated legal action against Digital Currency Group (DCG) and CEO Barry Silbert, accusing them of exploiting Genesis’s assets for personal and corporate gain. The lawsuits, filed in Delaware and New York courts, claim that DCG and its affiliates engaged in self-dealing and concealed Genesis’s insolvency. Creditors are pursuing the recovery of over $3.1 billion, including digital assets and a substantial promissory note.
Crypto Allegations of Misconduct and Financial Mismanagement
In the Delaware Chancery Court, the LOC alleges that DCG and Silbert operated Genesis as an extension of DCG’s treasury, utilizing its assets to benefit DCG and its subsidiaries, notably Grayscale Investments. The complaint asserts that Genesis extended loans on below-market terms and lacked proper lending controls, leading to significant financial instability.
A $1.1 billion promissory note issued by DCG to Genesis is highlighted as a deceptive measure, providing no immediate liquidity and misleading creditors about Genesis’s financial health. In a press release, LCO summarized its complaints:
DCG and Genesis are alleged to have operated as a single enterprise within Silbert’s crypto conglomerate, designed to generate profits for DCG, Silbert, and insiders using cryptocurrency provided primarily by Genesis creditors.
A separate lawsuit filed in the U.S. Bankruptcy Court for the Southern District of New York focuses on alleged fraudulent transfers exceeding $1.2 billion to insiders while Genesis was insolvent. The LOC contends that these transfers were part of a broader scheme to enrich DCG and its executives at the expense of Genesis’s creditors.
The lawsuits collectively seek the recovery of over 1 million digital coins, valued at approximately $2.1 billion, and the $1.1 billion promissory note.
Crypto DCG’s Response and Ongoing Legal Proceedings
DCG has dismissed the lawsuits as baseless, asserting to the Wall Street Journal that they recycle old claims in an opportunistic attempt by sophisticated investors to extract additional value:
This is a baseless lawsuit that recycles the same tired, two-year old claims in an opportunistic attempt by sophisticated investors to extract additional value from DCG. We worked in good faith with a wide range of stakeholders to try to achieve a comprehensive resolution of the DCG-related aspects of the Genesis bankruptcy. We will vigorously defend ourselves against these spurious claims.
DCG has already settled with the Securities and Exchange Commission for its oversight of its lender, but the company has been at odds with Genesis over a settlement facilitated by the New York attorney general’s office
