DCG Sues Genesis for $105M Repayment from $1.1B Bailout Note

Digital Currency Group (DCG) has filed a lawsuit against its former subsidiary, Genesis Global Capital, in the U.S. Bankruptcy Court for the Southern District of New York, seeking repayment of over $105 million in principal and interest from a $1.1 billion promissory note issued in 2022. The note was designed as a safeguard to address a balance sheet shortfall at Genesis following the collapse of Three Arrows Capital (3AC), which left Genesis with a $2.36 billion exposure [1]. DCG claims it voluntarily extended the note to stabilize its subsidiary and prevent further losses during the 2022 market turmoil [2].

According to the filing, as cryptocurrency prices rebounded and 3AC-related collateral—including shares of Grayscale’s Bitcoin Trust—increased in value, Genesis reaped significant gains. The collateral allowed Genesis to recover nearly $2.8 billion from the original $2.36 billion in loans, far exceeding the $1.1 billion shortfall [3]. DCG argues that this windfall means the subsidiary should have repaid the overpayment, rather than retaining the surplus. The parent company is now seeking court intervention to recover what it considers an overpayment made under emergency circumstances [4].

This legal action is part of a broader and contentious dispute between DCG and Genesis. In May 2024, Genesis filed its own lawsuit against DCG, its CEO Barry Silbert, and related entities, alleging fraud, insider enrichment, and concealed asset transfers that led to the withdrawal of over $1 billion during insolvency. Genesis is seeking $3.1 billion in compensation in the separate litigation [5]. The parent company, as an equity holder, remains at the bottom of the repayment list after Genesis completed its restructuring in August 2024 and distributed approximately $4 billion in funds to affected parties [6].

The case highlights the complex legal and financial obligations that arise when parent companies extend emergency funding during crises. The outcome could set a legal precedent for similar disputes in the crypto industry and beyond, particularly in determining how gains from collateralized assets are treated in the context of intercompany loans and insolvency proceedings. The interplay of market conditions, collateral management, and corporate governance will likely play a central role in the court’s final determination [1].

Source:

[1] TheBlock - [https://www.theblock.co/post/367123/digital-currency-group-files-lawsuit-against-subsidiary-genesis-over-1-1-billion-promissory-note-amid-post-crash-fallout](https://www.theblock.co/post/367123/digital-currency-group-files-lawsuit-against-subsidiary-genesis-over-1-1-billion-promissory-note-amid-post-crash-fallout)

[2] CryptoDnes.bg - [https://cryptodnes.bg/en/dcg-sues-genesis-over-1-1b-promissory-note-tied-to-post-3ac-collapse-rescue/](https://cryptodnes.bg/en/dcg-sues-genesis-over-1-1b-promissory-note-tied-to-post-3ac-collapse-rescue/)

[3] AInvest - [https://www.ainvest.com/news/dcg-sues-genesis-1-1b-promissory-note-repayment-3ac-fallout-2508/](https://www.ainvest.com/news/dcg-sues-genesis-1-1b-promissory-note-repayment-3ac-fallout-2508/)

[4] Benzinga - [https://www.benzinga.com/crypto/cryptocurrency/25/08/47162460/digital-currency-group-sues-genesis-over-1-1-billion-2022-bailout-amid-bankruptcy-dispute](https://www.benzinga.com/crypto/cryptocurrency/25/08/47162460/digital-currency-group-sues-genesis-over-1-1-billion-2022-bailout-amid-bankruptcy-dispute)

[5] Blockonomi - [https://blockonomi.com/dcg-sues-genesis-over-1-1b-note-issued-after-three-arrows-collapse/](https://blockonomi.com/dcg-sues-genesis-over-1-1b-note-issued-after-three-arrows-collapse/)

[6] Bitcoinsensus - [https://www.bitcoinsensus.com/news/business/dcg-filed-suit-against-genesis-1-1b-note-105m-due](https://www.bitcoinsensus.com/news/business/dcg-filed-suit-against-genesis-1-1b-note-105m-due)