DCG Sues Genesis for $1.1B Promissory Note Repayment Amid 3AC Fallout

Digital Currency Group (DCG) has filed a lawsuit against its former subsidiary, Genesis Global Capital LLC, in the U.S. Bankruptcy Court for the Southern District of New York, seeking repayment of over $105 million in principal plus interest. This is linked to a $1.1 billion promissory note issued in 2022 during the aftermath of the collapse of crypto hedge fund Three Arrows Capital (3AC) [1]. At the time, Genesis faced a $2.36 billion default exposure after 3AC failed to meet a margin call, leaving a significant gap in the equity of Genesis Asia Pacific [2]. DCG reportedly issued the note as a temporary measure to cover the shortfall and stabilize its subsidiary’s financial position [3].

The lawsuit claims that as the crypto market recovered and the value of 3AC-related collateral—referred to as “TAC Recoveries”—increased, the principal of the note should have been reduced on a dollar-for-dollar basis. According to DCG’s filing, the gains realized from the 3AC collateral far exceeded the original $1.1 billion principal, meaning the note should no longer be in effect. Instead of repaying DCG, Genesis allegedly retained the surplus, prompting the parent company to seek legal recourse to recover what it views as an overpayment [4].

This legal action is part of a larger, ongoing dispute between DCG and Genesis, which filed for bankruptcy in 2023 following the broader crypto market collapse of 2022. Genesis has since completed a restructuring process and distributed approximately $4 billion in assets to creditors, though DCG, as an equity holder, remains at the bottom of the repayment list [5]. Meanwhile, Genesis has also taken legal action against DCG and CEO Barry Silbert, accusing them of fraudulent activities, mismanagement, and self-dealing that led to the transfer of over $1 billion in assets during the period of insolvency. Genesis seeks to recover $3.1 billion in total in the separate lawsuit [6].

The case highlights the complex financial entanglements that emerged during the crypto market downturn and raises questions about the legal obligations of parent companies that provide emergency funding during financial crises. Analysts suggest the outcome could set a precedent for how such disputes are resolved in the future [7].

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] Binance - [https://www.binance.com/en/square/post/28354345442930](https://www.binance.com/en/square/post/28354345442930)

[4] AInvest - [https://www.ainvest.com/news/dcg-sues-genesis-1-1-billion-2022-bailout-repayment-2508/](https://www.ainvest.com/news/dcg-sues-genesis-1-1-billion-2022-bailout-repayment-2508/)

[5] 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)

[6] 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/)

[7] 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)