DCG Sues Genesis Subsidiaries Over $1.1 Billion Promissory Note

Digital Currency Group (DCG) has filed a lawsuit in the U.S. Bankruptcy Court for the Southern District of New York against two of its subsidiaries, Genesis Global Capital and Genesis Asia Pacific, seeking repayment of over $105 million plus interest under a $1.1 billion promissory note issued in June 2022 [2]. The promissory note was originally intended as a safeguard following the 2022 default of Three Arrows Capital (3AC), a hedge fund to which Genesis had extended $2.36 billion in loans. DCG claims that subsequent recoveries from 3AC’s collateral—valued at approximately $2.8 billion—have rendered the promissory note obsolete and fulfilled its obligations [2].

The lawsuit details how the promissory note was designed to protect Genesis Asia Pacific’s equity in the event of a shortfall from 3AC’s default. However, DCG argues that rising cryptocurrency prices and appreciating collateral, particularly in Grayscale Bitcoin Trust shares, allowed Genesis to recover far more than the estimated $1.1 billion shortfall. As a result, DCG asserts that the subsidiaries should return the proceeds received under the promissory note [2].

Genesis, however, has pushed back against the claims, with its legal counsel, Luke Barefoot of Cleary Gottlieb, stating that DCG’s allegations are without merit and inconsistent with existing agreements and prior court statements. Genesis also points out that DCG has already received over $100 million in distributions from 3AC recoveries, which it interprets as fulfillment of the note’s terms [2].

This legal battle comes in the context of a larger and ongoing dispute between DCG and Genesis. Earlier in 2025, Genesis filed its own lawsuit against DCG and CEO Barry Silbert, accusing the firm of fraudulent activities and seeking $3.1 billion in damages. That case centered around alleged pre-bankruptcy fund transfers and mismanagement. The latest lawsuit represents a continuation of the complex and contentious relationship between parent and subsidiary entities amid the aftermath of the 3AC and FTX market crashes [2].

The 2022 collapse of 3AC and the subsequent bankruptcy of FTX had a cascading effect on the broader crypto market, leading to liquidity freezes, multiple bankruptcies, and widespread investor losses. Genesis itself filed for Chapter 11 bankruptcy in January 2023 due to liquidity pressures. It completed a restructuring plan in August 2024, distributing approximately $4 billion to creditors and stakeholders [2].

This case highlights the intricate and often volatile legal and financial dynamics within the crypto industry. The outcome could set a precedent for intercompany obligations and the enforceability of promissory notes in the context of market disruptions and asset recoveries.

Source:

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

[2] https://coincodecap.com/dcg-issues-lawsuit-against-genesis-over-1-1-billion-promissory-note-tied-to-3ac-collapse

[3] https://www.outlookmoney.com/cryptocurrency/digital-currency-group-sues-genesis-over-promissory-note