The crypto lender Genesis has filed two lawsuits against its parent company Digital Currency Group (DCG) and its founder Barry Silbert for a total of $3.3 billion. In these legal documents, the company accuses DCG and its management of neglecting the interests of Genesis’s clients.
This is reported by Finway
According to information presented in the lawsuit filed in the Delaware Court of Chancery, DCG used Genesis’s assets, withdrawing funds under the guise of ensuring financial stability. The plaintiffs claim that Silbert and other top executives of the holding did not adhere to proper control measures during risky financial operations.
Allegations of Fraud and Breach of Duty
The Genesis creditors’ committee accuses DCG of breaching fiduciary duties and committing fraud. The lawsuit states that these actions generated income for DCG and Grayscale Investments, negatively impacting Genesis’s creditors. The company demands the return of crypto assets worth $2.1 billion in kind.
“Under Silbert’s control, Genesis positioned itself as a well-managed cryptocurrency bank. In reality, Silbert and DCG exploited the insolvent Genesis for their own interests. When Genesis collapsed and faced a massive hole in its balance sheet, DCG issued the firm a note for $1.1 billion, supposedly to bolster its liquidity and offset losses — in fact, this loan was not due for repayment for a decade and did not provide Genesis with the immediate liquidity it needed.”
Further Actions and Consequences
In an additional lawsuit filed in the U.S. Bankruptcy Court for the Southern District of New York, the Genesis Litigation Oversight Committee (LOC) is seeking to recover another $1.2 billion. These funds, according to the plaintiffs, were withdrawn from the company in the year leading up to its bankruptcy, while knowing about its financial insolvency.
Silbert and other executives are accused of deceiving investors and orchestrating sham transactions to create the appearance of financial stability, as well as securing loans against illiquid shares of Grayscale Investments. Genesis filed for bankruptcy in January 2023 and also faced a class-action lawsuit for selling unlicensed securities.
Part of the crypto lender’s assets has been recovered, including through the sale of GBTC shares. In August 2024, the company began returning funds to affected clients.