Crypto's Trust Crisis: Legal Storms Test Grayscale's $33B IPO

Grayscale's proposed $33 billion initial public offering (IPO) faces mounting legal challenges as litigation tied to the collapse of its affiliated entity, Genesis Global Capital, intensifies. The Genesis Litigation Oversight Committee (LOC) has filed two lawsuits-against Digital Currency Group (DCG), its founder Barry Silbert, and other insiders-in Delaware's Court of Chancery and the U.S. Bankruptcy Court for the Southern District of New YorkGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. The Delaware complaint alleges that DCG and Silbert treated Genesis as a "treasury" for DCG, recklessly operating and exploiting the insolvent firm until its bankruptcyGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. The LOC seeks "in-kind recovery of cryptocurrency" for creditors and claims over $1.2 billion in pre-bankruptcy transfers were improperly executed under a disputed "tax sharing agreement"Genesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1].

DCG and Silbert have moved to dismiss the suits, arguing they acted in good faith amid a broader crypto market collapse that triggered multiple lender failuresGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. The company also filed a countersuit in August 2025, seeking $1.1 billion in relief related to a promissory note issued to offset losses from Genesis's default on a $2.36 billion loan to Three Arrows Capital (3AC) in 2022Genesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. DCG claims the note's value was nullified by $2.8 billion in 3AC recoveries by May 2024, and it mistakenly paid Genesis $106 million post-voidingGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. Meanwhile, Genesis has pursued its own claims, seeking $2.2 billion in digital assets and alleging DCG extracted $450 million in crypto and $300 million in international transfers during Genesis's liquidity crisisGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1].

Regulatory scrutiny has further complicated the situation. In January 2025, the U.S. Securities and Exchange Commission (SEC) fined DCG $38 million and former Genesis CEO Michael Moro $500,000 for misleading investors about the firm's financial health following the 3AC collapseGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. Court filings revealed DCG executives were aware of over $1 billion in Genesis losses while continuing to present the business as solventGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. Additional legal pressure emerged in September 2025, when the FTX Recovery Trust sued Genesis Digital Assets for $1.15 billion, alleging FTX founder Sam Bankman-Fried used misappropriated exchange funds to inflate Genesis share valuationsGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1].

The litigation has raised concerns among underwriters and regulators about Grayscale's disclosures and DCG's financial entanglements with GenesisGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. Despite these risks, Grayscale submitted confidential IPO documents to the U.S. SEC in June 2025, positioning the offering as a landmark transaction for crypto asset managementGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1]. However, industry observers warn that unresolved legal disputes could delay the IPO or erode investor confidence, particularly in a market still reeling from past crypto failures like Celsius and BlockFiGenesis Lawsuit Threatens Grayscale’s $33B IPO Plans^[2]. The SEC's recent enforcement actions and the scale of Genesis's liabilities underscore the regulatory and reputational risks facing the IPOGenesis Lawsuit Threatens to Derail Grayscale’s Landmark $33B IPO^[1].

Analysts note that the outcome of these lawsuits could influence broader market trust in crypto asset managers. Genesis's bankruptcy led to a $2 billion settlement in 2023, disrupting lending and liquidity across the sectorGenesis Lawsuit Threatens Grayscale’s $33B IPO Plans^[2]. Continued litigation may deter institutional investors, who are increasingly cautious about governance and transparency in crypto firmsGenesis Lawsuit Threatens Grayscale’s $33B IPO Plans^[2]. For Grayscale, the IPO's success hinges on resolving these legal uncertainties while demonstrating robust safeguards against future misconductGenesis Lawsuit Threatens Grayscale’s $33B IPO Plans^[2].