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

Digital Currency Group (DCG) has initiated legal proceedings in the U.S. Bankruptcy Court against its subsidiary, Genesis Global Capital, demanding repayment of a $1.1 billion promissory note issued in 2022 amid the collapse of Three Arrows Capital (3AC) [7]. The lawsuit contends that Genesis retained excess funds from collateral gains after the initial shortfall was supposedly covered, and DCG asserts that the subsidiary should return over $105 million as a result [7]. DCG’s CEO, Barry Silbert, stated the note was issued to stabilize Genesis’s balance sheet and protect account holders in the wake of the 3AC default [7].

Genesis has responded with a countersuit, seeking $3.1 billion in damages from DCG and Silbert, alleging fraudulent asset transfers and mismanagement during the insolvency process [3]. The subsidiary claims it is also seeking additional capital to fulfill its obligations to customers and is challenging DCG’s handling of internal asset distributions [6]. The legal battle has escalated beyond the original loan amount, with both parties now vying for control over billions in assets and repayment claims [3].

The dispute has raised concerns about the systemic risks embedded in intra-group lending within the crypto industry. Experts highlight that the case may establish legal precedents for how profits from collateral—such as those derived from 3AC’s liquidation—should be treated in bankruptcy proceedings [4]. The outcome could influence future regulatory approaches to institutional crypto lending, particularly in volatile markets [7].

The litigation also echoes similar intra-group legal actions following the collapses of FTX and TerraUSD, underscoring the fragility of financial structures in the crypto sector [7]. The case has intensified public and industry scrutiny, with ongoing discussions on platforms such as Twitter and Discord emphasizing concerns about self-dealing and internal mismanagement [7]. The Genesis Litigation Oversight Committee has released detailed filings outlining DCG’s alleged mismanagement of funds and questionable asset transfers [7].

As the case progresses, it may have broader implications for the governance and legal frameworks governing crypto firms, particularly regarding the transparency of internal financial operations and the treatment of promissory notes in insolvency scenarios [7].

Source:

[1] Digital Currency Group Sues Subsidiaries Over $1.1B (https://cointelegraph.com/news/digital-currency-group-lawsuit-genesis-promissory-note)

[2] Digital Currency Group Sues Genesis for Over $1.1B in (https://coincentral.com/digital-currency-group-sues-genesis-for-over-1-1b-in-promissory-note/)

[3] DCG Sues Genesis for $105M Over $1.1B Post-3AC (https://www.ainvest.com/news/dcg-sues-genesis-105m-1-1b-post-3ac-rescue-note-2508/)

[4] DCG Sues Genesis for $105M Repayment from $1.1B (https://www.ainvest.com/news/dcg-sues-genesis-105m-repayment-1-1b-bailout-note-2508/)

[6] Digital Currency Group (DCG) drags subsidiary Genesis (https://www.bitget.com/news/detail/12560604914805)

[7] DCG Sues Genesis Over $1.1B Promissory Note Tied to (https://cryptodnes.bg/en/dcg-sues-genesis-over-1-1b-promissory-note-tied-to-post-3ac-collapse-rescue/)