Bitcoin News Today: DCG Demands $105 Million from Genesis Over 2022 Promissory Note

Digital Currency Group (DCG) has filed a demand for more than $105 million in repayment from its former subsidiaries, Genesis Global Capital and Genesis Asia Pacific, in a dispute tied to a $1.1 billion promissory note issued in June 2022. The filing, submitted to the U.S. Bankruptcy Court for the Southern District of New York, alleges that Genesis failed to meet its repayment obligations under the note, despite not experiencing the severe liquidity crisis that initially prompted its issuance [1]. The note was designed to protect DCG in the event that Genesis Asia Pacific suffered major losses following the collapse of 3AC, a major crypto lender that defaulted on its loans during the 2022 market downturn [2].

According to court documents, Genesis allegedly profited “hundreds of millions of dollars” from collateral tied to the loans—specifically, assets such as shares of Grayscale’s Bitcoin Trust that rebounded in value as Bitcoin recovered. DCG claims that Genesis ultimately recouped nearly $2.8 billion from $2.36 billion in loans, turning what was expected to be a costly default into a financial gain [3]. The company is now seeking to recover more than $105 million plus interest, arguing that it is entitled to repayment under the terms of the promissory note.

The legal action adds another layer to the ongoing disputes between DCG and Genesis. In May 2024, Genesis filed its own lawsuit against DCG, its affiliates, and CEO Barry Silbert, accusing them of fraud, insider enrichment, and improper fund transfers. Genesis alleged that DCG drained billions from its subsidiaries prior to its bankruptcy filing in January 2023 [4]. DCG has denied these claims, maintaining that its actions were in line with its fiduciary duties.

The Genesis collapse was part of a broader chain reaction triggered by the 2022 market crash, which also saw the implosions of Terra, 3AC, and later FTX. The crisis led to widespread liquidity crunches across the crypto industry, with many firms forced to halt withdrawals or file for bankruptcy. Genesis eventually completed a restructuring in August 2024, repaying approximately $4 billion to creditors [5].

The DCG-Geneis legal saga highlights the risks and complexities of interlinked lending structures in the crypto industry. The 3AC collapse exposed vulnerabilities in collateralization and asset management practices, particularly when major players are interconnected. DCG’s attempt to recoup its investment through litigation underscores the financial uncertainties of bailouts in a sector where asset valuations can shift rapidly and unpredictably.

The case is currently under judicial review, with the court expected to evaluate the validity of DCG’s claim in the context of the broader market conditions at the time the promissory note was issued. The outcome could set a precedent for how parent companies handle similar financial obligations during crisis interventions.

Source: [1] https://coindoo.com/dcg-demands-105m-from-genesis-after-3ac-collapse/

[2] https://www.ainvest.com/news/bitcoin-news-today-dcg-sues-genesis-105-million-2022-promissory-note-2508/

[3] https://www.bitget.com/news/detail/12560604914351

[4] https://coinness.com/en/news/80986

[5] https://coinmarketcap.com/community/articles/68a057a238b1046dd942479c/