Grayscale's $33B IPO Faces Trust Test as Crypto's Governance Fault Lines Exposed

Barry Silbert's Digital Currency Group (DCG) faces mounting legal challenges as it seeks to finalize a $33 billion initial public offering (IPO) for its asset management arm, Grayscale. The IPO, widely anticipated as a potential milestone for crypto asset management, has been clouded by ongoing litigation tied to the collapse of Genesis, a now-bankrupt DCG subsidiary. The lawsuits, filed by the Genesis Litigation Oversight Committee (LOC), allege that Silbert and DCG insiders mismanaged Genesis's finances, manipulated disclosures, and prioritized their own interests over creditor protection . These legal disputes threaten to complicate the IPO process, raising questions about governance, transparency, and institutional trust in the crypto sector.

The Genesis bankruptcy, declared in January 2023, stemmed from heavy losses linked to loans extended to Three Arrows Capital and Alameda Research. The fallout has left creditors and regulators scrutinizing DCG's role in the crisis. The LOC filed two lawsuits in May 2025: one in Delaware's Court of Chancery and another in the U.S. Bankruptcy Court for the Southern District of New York. The Delaware complaint accuses Silbert and DCG of treating Genesis as a "treasury" for DCG, misusing creditor funds, and failing to disclose material risks. The bankruptcy court filing seeks to recover over $1.2 billion in pre-collapse transfers, including disputed payments under a purported "tax sharing agreement" . DCG and Silbert have denied wrongdoing, arguing they acted in good faith during a "catastrophic sector-wide downturn" and worked to stabilize Genesis before its collapse became inevitable .

The legal battles have drawn sharp criticism from industry figures and creditors. Gemini co-founders Cameron and Tyler Winklevoss have accused Silbert of eroding trust in the digital asset ecosystem. Tyler Winklevoss emphasized that accountability for key market participants is essential to restoring credibility . Meanwhile, Genesis creditors remain frustrated by delays in repayment. One investor, who lost $2.5 million through Genesis, expressed skepticism about Silbert's leadership, stating, "I used to think he was a reliable person, a pioneer in the crypto industry. That's why I was willing to invest so much" . The LOC's lawsuits, which include claims of insider knowledge of Genesis's vulnerabilities as early as 2021, further amplify concerns about DCG's risk management practices .

Despite these challenges, Silbert has reaffirmed his commitment to the Grayscale IPO. He returned to Grayscale's board as chairman in 2025 and highlighted the IPO's potential to "transform private trusts into public vehicles," broadening access to crypto assets for institutional and retail investors . Analysts like Frank Chaparro of GSR have described the offering as a "landmark debut," potentially signaling growing institutional confidence in crypto markets . However, underwriters and regulators are likely to scrutinize DCG's handling of conflicts of interest and related-party transactions, given the ongoing litigation . The IPO's success could hinge on Silbert's ability to distance himself from the Genesis controversies while demonstrating Grayscale's operational independence and compliance safeguards.

The broader crypto landscape remains polarized. While Silbert's return to the board and DCG's new ventures, such as a decentralized AI model marketplace, suggest a strategic pivot, critics argue that the Genesis fallout has exposed systemic risks in crypto lending and governance. Former Genesis employees have questioned whether Silbert adequately assessed risks after the Three Arrows Capital collapse, with one noting, "He should have looked at Genesis after the 3AC fall and asked: will this affect us?" . Meanwhile, the IPO's timing coincides with a cautious but resurging market environment, as seen in plans by companies like Kraken and Revolut to pursue public listings in 2025 and 2026 .

As the IPO progresses, the legal and reputational stakes for Silbert and DCG remain high. The outcome could set a precedent for how public markets perceive crypto asset managers, particularly in the wake of high-profile failures. For Grayscale, the challenge will be to convince investors that it can navigate regulatory scrutiny and rebuild trust while delivering the innovation and growth promised in its public filing.