DCG Countersues Genesis for $1.1B Amid $3.1B Damages Claim

Digital Currency Group (DCG) has filed a countersuit against its bankrupt subsidiary Genesis Global Capital, seeking $1.1 billion in repayment of a promissory note and an additional $105 million in alleged overpayments made during the period of financial distress. The legal action follows Genesis’s pursuit of over $3.1 billion in damages against DCG through multiple ongoing lawsuits. The dispute centers on a $1.1 billion promissory note issued by DCG in June 2022 to cover potential losses from Three Arrows Capital’s default on $2.36 billion in loans to Genesis. The note included provisions for automatic reductions in principal based on any recoveries from Three Arrows Capital’s assets. Genesis later recovered nearly $2.8 billion, primarily through GBTC shares, which led DCG to claim the note’s principal had been reduced to zero. Despite this, DCG continued to make payments totaling $106 million to Genesis, which it now seeks to recover through legal claims including unjust enrichment and declaratory judgment [1].

Genesis, which filed for bankruptcy in January 2023 amid $3.5 billion in debts, has countered with its own legal efforts, including a $2.2 billion claim for crypto assets in Delaware courts and over $1 billion in alleged fraudulent transfers in New York bankruptcy proceedings. The subsidiary alleges that DCG extracted $450 million in crypto assets and $297 million through international transfers while Genesis faced liquidity stress. Internal documents obtained by Genesis’s Litigation Oversight Committee describe a corporate culture in which DCG allegedly treated its subsidiary as a “de facto treasury,” extracting value through insider loans and high-risk financial strategies. Genesis employees reportedly viewed this as a “culture of submission,” prioritizing DCG’s interests over their own operational stability [2].

Regulatory scrutiny has further complicated the situation. In January 2025, the Securities and Exchange Commission fined DCG $38 million and former Genesis CEO Michael Moro $500,000 for misleading investors about the company’s financial health following the collapse of Three Arrows Capital. The SEC found that DCG executives were aware of over $1 billion in Genesis losses but publicly misrepresented the subsidiary’s financial stability. This revelation has added to the legal and reputational challenges facing DCG and its executives [3].

The legal and financial entanglements have not prevented Genesis from making significant progress in returning funds to creditors. By May 2024, the company had distributed $2.18 billion to approximately 232,000 users, including a pending $1.8 billion settlement with Gemini Earn participants. DCG had also settled over $1 billion in debt, including $627 million owed to Genesis by January 2024, following a November 2023 agreement after Genesis sued for loan repayments. Despite these settlements, DCG had defaulted on over $620 million in debt by May 2023 [4].

The ongoing legal battles and regulatory actions highlight the broader corporate governance and risk management issues that have emerged from the 2022 crypto market collapse. Both companies continue to navigate bankruptcy restructuring, creditor claims, and regulatory enforcement as they seek to resolve the complex financial and legal liabilities that have arisen from the crisis [5].

Source: [1] DCG Countersues Genesis for $1.1B After Subsidiary Claims $3.1B Damages (https://cryptonews.com/news/dcg-countersues-genesis-for-1-1b-after-subsidiary-claims-3-1b-damages/)