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- Genius Group is legally blocked from raising funds or expanding its Bitcoin Treasury.
- The company is downsizing operations and selling part of its Bitcoin holdings.
- Legal actions are ongoing to overturn the court’s decision and resume normal operations.
Singapore-based Genius Group has hit a legal wall in its efforts to expand its Bitcoin holdings. A recent U.S. court order has barred the AI-powered education company from selling shares, raising capital, or using investor money to buy Bitcoin. The decision stems from an ongoing legal dispute tied to a past acquisition deal.
Genius had intended on expanding its Bitcoin treasury with the money raised via public markets. That plan, though, has been put on the burner. In March, the U.S. District Court for the Southern District of New York handed down a preliminary injunction. That followed a February temporary restraining order against the company. Both had the effect of blocking the company’s access to funding channels.
Fraud Claims Spark Legal Battle
The case dates back to a request by Genius for the end of a previous deal with Fatbrain AI (LZGI). Shareholders in LZGI had sued their own management for fraudulent activities concerning the transaction. Their executives were charged by the SEC with fraud for misleading investors.
Soon enough, the deal’s executives attempted legal action against the use by Genius of its $150 million stock issue program. Executives allege that Genius improperly raised capital for the acquisition of Bitcoin. Genius responded that these allegations were spurious and sought by the company to pressure it financially.
A transcript of a taped conversation appearing on Genius indicated the court orders were exploited as leverage in a personal deal. Although initially included as a named defendant in the lawsuits, Genius is now no longer so. Its injunctions, however, still hold.
Bitcoin Treasury Shrinks Amid Court Block
With the normal operations and fundraising stifled by the court order, Genius is retrenching. It is shutting down divisions, halting sponsorships, and suspending all advertising. In order to remain afloat, it began selling some of its Bitcoin assets, draining the treasury by downscaling it from 440 to 430 BTC.
It is also filing for relief with the appeals court. It wants the legal block removed so that it can go ahead with its business plans. Its management maintains that it stands by its mission and will defend itself and its operations against the allegations raised against it.
Stock in Genius Group dropped over 50% since the court ruling. According to the company, this is a direct consequence resulting from restricting its core business operations. Nevertheless, the leadership stands unflinching in defending its assets and shareholders.
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