Genesis also sued DCG for $2.1 billion to get more funds to pay back additional customers, accusing it of fraud and mismanagement amounting to $3.1 billion.
Digital Currency Group (DCG) has reportedly filed a lawsuit against its bankrupt subsidiary, Genesis Global Capital LLC, seeking over $105 million plus interest in relation to a $1.1 billion promissory note issued in 2022.
DCG filed its complaint on Thursday in the U.S. Bankruptcy Court in the Southern District of New York. In the lawsuit, it claimed that it had attempted to fix a potential “hole” after the collapse of crypto hedge fund Three Arrows Capital in 2022, which the firm said was one of Genesis’s largest borrowers, via the $1.1 billion promissory note.
DCG drags subsidiary to court
According to DCG, Three Arrows did not satisfy a margin call by Genesis in 2022, which led to a $2.36 billion default and subsequently left a gap in the book value of GAP’s (Genesis Asia Pacific Pte. Ltd.) equity.
However, later, crypto prices recovered and Genesis allegedly recorded “massive gains from the TAC Collateral in excess of the value of the TAC Collateral at the time of the issuance of the Note — which are denominated as ‘TAC Recoveries’ — immediately and automatically reduced the Principal Amount of the Note on a dollar-for-dollar basis.”
“In fact, Genesis has realized gains on the TAC Collateral subsequent to issuance of the Note that far exceed its initial $1.1 billion Principal Amount,” the filing claims.
DCG now wants the court to make Genesis Global Capital pay it over $105 million plus interest.
The lawsuit is the latest move in the ongoing saga between Genesis and DCG. Back in May, the Genesis Litigation Oversight Committee slammed DCG, its CEO Barry Silbert, and other executives with lawsuits in a bid to recover billions in funds that were allegedly taken away falsely from the company in 2022.
Genesis was among the crypto firms that faced severe financial strain following the fall of giants like TerraUSD, FTX, and 3AC, leading to its bankruptcy filing in 2023. It was able to complete a restructuring last year and has distributed approximately $4 billion in assets to creditors, with DCG, as an equity holder, last in line for repayment.
Genesis has also sued its former parent company for $2.1 billion so it can get more funds to pay back additional customers.
Genesis also filed a lawsuit against its former parent company
Genesis Global Capital filed a lawsuit against its parent company, Digital Currency Group (DCG), and CEO Barry Silbert, alleging fraud and mismanagement amounting to $3.1 billion.
According to the lawsuit, DCG mismanaged funds and engaged in fraudulent activities like insider self-dealing, fraud, and mismanagement by Silbert, accusing him of improper transfers exceeding $1 billion while the company was insolvent, all of which led to significant financial losses for Genesis and its stakeholders.
The lawsuit was filed in two courts, with Genesis seeking to recover over $3.1 billion related to note and asset transfers incurred during the financial turmoil affecting the cryptocurrency market at the time.
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