Genesis Global has taken legal action against its parent company, Digital Currency Group (DCG), by filing two new lawsuits to recover allegedly improperly transferred billions of dollars as the lender’s financial state deteriorated in 2022.
The newly released filings accuse DCG, CEO Barry Silbert, and other executives affiliated with orchestrating fraudulent transfers and providing misleading disclosures. The Delaware Chancery Court complaint asserts that Genesis was recklessly operated, exploited, and ultimately bankrupted by its parent company through a campaign of fraud and self-dealing.
Barry Silbert is alleged to have concealed the crisis at Genesis from its lenders while being fully aware of the risks associated with Genesis’ loan book and its vulnerability to Gemini and Bitvavo.
The lawsuits also suggest that Grayscale Investments benefited from the misconduct, although the company is not named as a defendant in the case.
If Genesis prevails in court, the outcome could set a precedent that strengthens creditor rights, expands liability for parent companies in the digital finance sector, establishes new standards for transparency and accountability in the crypto industry, according to Andrew Rossow, a cyber and public affairs attorney.
Genesis is seeking over $3.1 billion in damages, including a $1.1 billion promissory note and more than $1.2 billion in disputed transfers, some of which were made in cryptocurrency now valued at over $2 billion.
Promises and Losses
A central aspect of the lawsuit is DCG’s issuance of a 10-year, $1.1 billion promissory note in 2022 to cover Genesis’s losses resulting from Three Arrows Capital’s default. The note, which had a 1% interest rate, is alleged to have failed to provide real liquidity.
The lawsuits have the backing of the Genesis Litigation Oversight Committee (LOC), which represents the interests of creditors. The committee claims that the defendants disseminated misleading information and false financial reports to avoid a bank run and profit from Genesis’s downfall before its collapse.
According to the Delaware complaint, the first signs of a bank run appeared on May 7, 2022, with LUNA’s price per coin dropping from $80 to nearly zero within three days, resulting in tokens becoming essentially worthless and erasing $45 billion in value at the time.
Transfers and Recovery
Genesis has also filed a separate federal bankruptcy complaint in New York outlining over $1.2 billion in allegedly preferential transfers to DCG and insiders before its Chapter 11 filing in January 2023. These transfers included significant amounts to DCG, DCG International, and HQ Enhanced Yield Fund, among others.
Genesis further alleges that $34 million in tax payments to DCG were fraudulent and is seeking in-kind recovery of over 19,000 BTC, 69,000 ETH, and 17 million tokens in other digital assets.
In January 2025, DCG and former Genesis CEO Michael Moro agreed to pay $38 million to settle SEC charges of misleading investors about Genesis’s exposure to the collapse of Three Arrows Capital. The SEC stated that DCG created a materially false impression of Genesis’s financial health post-default, with neither party admitting nor denying the allegations.
Despite a proposed $2 billion settlement between Genesis and DCG by May 2024, litigation between the parties is ongoing. Andrew Rossow expressed his dismay at the situation, highlighting the lack of fiscal responsibility and fiduciary duty among industry leaders.
Edited by Sebastian Sinclair