Genesis Global Sues DCG for $3.1 Billion in Alleged Fraud

Genesis Global has initiated legal action against its parent company, Digital Currency Group (DCG), filing two lawsuits aimed at recovering over $3.1 billion in alleged improper transfers and a $1.1 billion promissory note. The complaints allege that DCG and its key executives orchestrated fraudulent transfers and misleading disclosures as Genesis's financial condition deteriorated in 2022. The lawsuits claim that DCG used Genesis as a corporate "alter ego" to enrich affiliates and conceal mounting losses from creditors.

The Delaware Chancery Court complaint alleges that Genesis was "recklessly operated, exploited, and then bankrupted" by its parent company, following "a spectacular campaign of fraud and self-dealing." The lawsuits further allege that DCG CEO Barry Silbert was aware of the risks embedded in Genesis's loan book and its vulnerability to certain financial entities, yet he allegedly stepped in to conceal the crisis from lenders.

Central to the Delaware filing is DCG's issuance of a 10-year, $1.1 billion promissory note in 2022, intended to cover Genesis's losses from Three Arrows Capital's default. The note had a 1% interest rate and allegedly failed to provide real liquidity. The lawsuits are supported by the Genesis Litigation Oversight Committee (LOC), appointed by the bankruptcy court to represent creditors' interests. The committee claims that the defendants spread misleading information and false financial reports to prevent a bank run and profit from the failing lender before its collapse.

The first signs of a bank run appeared on May 7, 2022, with the tokens involved (TerraUSD and LUNA) becoming "essentially worthless" and erasing $45 billion in value at the time. Genesis filed a separate federal bankruptcy complaint in New York, detailing over $1.2 billion in allegedly preferential transfers to DCG and insiders before its Chapter 11 filing in January 2023. Those transfers included $448 million to DCG, $136 million to DCG International, and $101 million to HQ Enhanced Yield Fund, among others.

Genesis also claims that $34 million in tax payments to DCG were fraudulent and is seeking in-kind recovery of over 19,000 BTC, 69,000 ETH, and 17 million tokens across other digital assets. DCG and former Genesis CEO Michael Moro agreed in January 2025 to pay $38 million to settle SEC charges that they misled investors about Genesis's exposure to the collapse of Three Arrows Capital. The SEC said DCG created a “materially false impression” of the lender’s financial health after the default, while neither party admitted nor denied the allegations.

By May 2024, Genesis had reached a proposed $2 billion settlement with DCG, though litigation remains ongoing. The outcome of this case could set a precedent that strengthens creditor rights, expands liability for parent companies in digital finance, and establishes new standards for transparency and accountability in the crypto industry. The lawsuits seek to recover over $3.1 billion, including a $1.1 billion promissory note and more than $1.2 billion in disputed transfers, some of which were made in crypto now valued at over $2 billion.