As Grayscale continues to forge ahead with its plans for a $33 billion initial public offering, legal troubles stemming from the collapse of Genesis Global Capital are looming large and may overshadow this significant milestone, as reported by the Financial Times.
Barry Silbert, the founder of Digital Currency Group (DCG), is leading the charge to take Grayscale public, marking a historic move as the first major public offering by a crypto asset manager. However, ongoing lawsuits linked to Genesis’s bankruptcy are creating uncertainty around the IPO process.
In May 2025, the Genesis Litigation Oversight Committee (LOC) filed two separate lawsuits in Delaware’s Court of Chancery and the U.S. Bankruptcy Court for the Southern District of New York. The Delaware complaint alleges that Silbert, DCG, and other insiders treated Genesis as DCG’s “treasury,” leading to its reckless operation, exploitation, and bankruptcy. The LOC is seeking the recovery of cryptocurrency for creditors who had entrusted their assets to Genesis.
The bankruptcy court complaint aims to reclaim over $1.2 billion in transfers made before Genesis’s collapse, including disputed payments under a purported “tax sharing agreement.” DCG and Silbert have moved to dismiss the suits, asserting that they acted in good faith during a tumultuous market crash that saw multiple crypto lenders fail.
Despite the legal challenges, Silbert recently resumed his role as Grayscale’s board chairman, underscoring his commitment to the company’s IPO aspirations. However, industry experts caution that underwriters and regulators will closely examine DCG’s financial ties to Genesis and its transparency with investors before proceeding with any public listing.
The legal dispute traces back to the aftermath of Three Arrows Capital’s collapse in June 2022, when the hedge fund defaulted on $2.36 billion in loans from Genesis. DCG intervened with a $1.1 billion promissory note to offset the losses, sparking a series of court battles.
Genesis alleges that DCG and its executives used the note to mask the firm’s financial woes before bankruptcy. In response, DCG filed a countersuit seeking relief from the promissory note and reimbursement for alleged overpayments. The parent company argues that recoveries from Three Arrows Capital effectively nullified the note’s value, justifying its claim for repayment.
Genesis has launched its own legal offensive, pursuing digital assets worth $2.2 billion and over $1 billion in disputed transfers through separate cases in Delaware and New York. The company accuses DCG of siphoning crypto assets and international transfers as Genesis faced liquidity challenges.
Regulatory scrutiny has further complicated the situation, with the SEC fining DCG and former Genesis CEO Michael Moro for misleading investors about the company’s financial health post-Three Arrows collapse. Revelations from the SEC case exposed DCG’s knowledge of significant Genesis losses while presenting a facade of solvency.
Despite the legal quagmire, Grayscale is pressing ahead with its IPO plans, confidentially submitting documents to the SEC in June. While the legal battles continue to unfold, Grayscale remains steadfast in its pursuit of a landmark $33 billion stock market debut, navigating a complex landscape of legal challenges and regulatory scrutiny.