Digital Currency Group Sues Genesis Over $1.1B Bailout Repayment

Digital Currency Group (DCG) has initiated legal action against its former subsidiary, Genesis Global Capital LLC, in the U.S. Bankruptcy Court for the Southern District of New York, demanding repayment of more than $105 million in principal and interest. The lawsuit centers on a $1.1 billion promissory note issued in June 2022, following the collapse of crypto hedge fund Three Arrows Capital (3AC) [1]. At the time, Genesis faced a $2.36 billion default risk after 3AC failed to meet a margin call, creating a substantial equity gap in its Asia Pacific operations [2]. DCG issued the note as a temporary measure to stabilize Genesis and prevent further financial decline [3].

According to the lawsuit, as the crypto market recovered, the value of 3AC-related collateral—referred to as “TAC Recoveries”—rose significantly. DCG claims that the value of this collateral exceeded the $1.1 billion principal of the note, effectively reducing or negating the outstanding balance. The firm alleges that Genesis retained the surplus from these recoveries instead of repaying the amount owed, prompting the legal action to recoup what DCG describes as an overpayment [4].

This legal dispute is part of a broader conflict between DCG and Genesis. In May, Genesis, through its Litigation Oversight Committee (LOC), filed a counter-suit against DCG and CEO Barry Silbert, accusing the company of fraud, mismanagement, and self-dealing. The counter-suit alleges that DCG transferred over $1 billion in assets during the period of insolvency and seeks to recover $3.1 billion in total [6].

Genesis filed for bankruptcy in 2023 following the broader 2022 crypto market downturn and has since completed a restructuring process, distributing around $4 billion in assets to creditors. As an equity holder, DCG remains at the bottom of the repayment priority list [5]. DCG has contested the restructuring plan, claiming it unfairly prioritizes creditors over its own interests.

The case raises important legal and financial questions about the obligations of parent companies during emergency bailouts. The outcome could set a precedent for how such disputes are resolved in the future and may influence similar conflicts in the crypto sector, particularly in the aftermath of the 2022 market turmoil [7]. The legal battle underscores the complex interplay between corporate governance, financial responsibility, and insolvency proceedings in the fast-evolving crypto industry.

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)