DCG Sues Genesis for $105M Over $1.1B Post-3AC Rescue Note

Digital Currency Group (DCG) has filed a lawsuit against its former subsidiary, Genesis Global Capital, seeking over $105 million in repayment from a $1.1 billion promissory note issued in 2022 as part of a rescue operation following the collapse of Three Arrows Capital (3AC) [1]. The note, which was intended to stabilize Genesis’s balance sheet during a financial crisis, is now at the center of a legal battle. DCG alleges that Genesis has failed to repay the principal or interest despite realizing significant collateral gains from the assets pledged during the rescue [2].

The legal dispute emerged as Genesis itself filed a countersuit against DCG and its CEO, Barry Silbert, accusing the company of fraudulent conduct related to $3.1 billion in asset transfers during the insolvency process [3]. Both parties have refrained from making public statements, emphasizing their reliance on legal proceedings to resolve the matter. DCG, in its filing, stated that its actions were aimed at preserving the stability of the broader entities under its umbrella, and it remains committed to pursuing its claims through the courts [4].

This case highlights the complex and opaque nature of collateral-based lending in the cryptocurrency sector, especially during periods of systemic stress. Genesis reportedly recovered $2.8 billion from the collateral tied to the original $1.1 billion note, a development that DCG claims it is now entitled to a portion of based on the repayment terms of the loan [5]. Meanwhile, Genesis argues that the gains it has realized should alter the interpretation of repayment obligations, leading to conflicting legal interpretations of the terms [6].

Analysts suggest that the outcome of this case could set a precedent for how intra-group financial disputes are managed in the crypto industry. The involvement of large sums, coupled with the unconventional structures used in crypto collateral management, raises questions about the applicability of traditional legal frameworks in this context [7]. The legal battle is also expected to draw attention from financial regulators, particularly as it could influence future governance and risk management practices in crypto asset lending and insolvency proceedings.

The lawsuit adds to the ongoing legal and financial turmoil that has followed the collapse of 3AC and its cascading effects on the broader crypto market. With both DCG and Genesis vying for legal and financial leverage, the case may redefine creditor prioritization and asset handling in similar insolvency scenarios. It also draws comparisons to past major industry failures, such as TerraUSD and FTX, which triggered significant regulatory and structural shifts in the sector.

Source:

[1] Cointelegraph, [https://cointelegraph.com/news/digital-currency-group-lawsuit-genesis-promissory-note](https://cointelegraph.com/news/digital-currency-group-lawsuit-genesis-promissory-note)

[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-105m-repayment-1-1b-bailout-note-2508](https://www.ainvest.com/news/dcg-sues-genesis-105m-repayment-1-1b-bailout-note-2508)

[4] 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/)

[5] CoinGlass, [https://www.coinglass.com/ru/news/534883](https://www.coinglass.com/ru/news/534883)

[6] FinanceFeeds, [https://financefeeds.com/](https://financefeeds.com/)

[7] Stocktwits, [https://stocktwits.com/symbol/BTC.X](https://stocktwits.com/symbol/BTC.X)