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- Genesis sues DCG and Barry Silbert to recover over $1 billion in assets transferred during insolvency.
- Lawsuits allege DCG’s fraud, self-dealing, and mismanagement contributed to Genesis’ collapse.
- Legal actions aim to reclaim over $1 billion in transfers, including $448 million sent to DCG before bankruptcy.
Genesis Global Capital has initiated legal steps against Digital Currency Group (DCG) and its CEO, Barry Silbert, by filing two lawsuits. The crypto lender is working to recoup over $1 billion that was sent out during the insolvency period. Genesis says that the company’s troubles caused DCG and the affiliates to use Genesis’ assets without permission. The lawsuits point to various alleged wrongdoings by Genesis as the reason for its collapse.
Bloomberg Law reported on May 20 that Genesis claims DCG and some of its officials have engaged in self-dealing, committed fraud, and mismanaged the company. The lender alleges that Genesis’s creditors and customers suffered because of improper and dishonest lending activities.
They are seeking to have one million digital assets worth $2.1 billion returned to them. Genesis suggests these funds were reallocated in order to benefit DCG when Genesis was experiencing financial difficulties.
Genesis Seeks to Recover Funds
DCG and Grayscale Investments were sued in Delaware. Genesis claims that the defendants shared inaccurate information with the market regarding the company’s finances. Therefore, Genesis alleges that DCG and Grayscale used certain funds from the lender to gain benefits for themselves. Overlooking both investors and customers. In addition, the investigation reveals that Genesis’ financial difficulties were known by some DCG employees but not made public.
In the U.S. Bankruptcy Court in the Southern District of New York, a second legal case was filed. Bankruptcy Court for the Southern District of New York. The intention of this case is to recover more than $1 billion that was sent to overseas wallets in the period just before Genesis’ bankruptcy filing last January.
Among these transfers, $448 million was transferred to DCG, $136 million to DCG International and $101 million to HQ Enhanced Yield Fund. The company is also bringing a suit to get back $34 million, said to be illegitimate payments for taxes.
Crypto Market Turmoil Impact
Genesis notes that these money transfers took place during a time when the cryptocurrency market was facing turmoil due to the collapse of Terra-Luna, Three Arrows Capital and FTX. Genesis stated in its lawsuit that as of the end of 2021, its loans were not paid, and it became insolvent with $14 billion. The company reports that its legal team found evidence that DCG executives were aware of Genesis’ higher risks but did nothing to tackle the issue.
The company filed for Chapter 11 in January 2023 and completed the restructuring procedure in August 2024. During the restructuring, over $4 billion in cash and digital assets were sent to the creditors. Gemini Earn users were still set to receive $2.2 billion despite DCG’s efforts to prevent it. The claims seek to assure DCG that it pays for the damage caused by company’ failures. And to support creditors in getting more compensation.
