In a new legal move, bankrupt crypto lender Genesis has taken its parent company, Digital Currency Group (DCG), and CEO Barry Silbert to court, accusing them of fraud, misuse of company funds, and reckless handling of finances. Genesis is now trying to recover more than $3.3 billion, it says was wrongly taken.
The lawsuits, unsealed on May 19 by the Delaware Court of Chancery and the U.S. Bankruptcy Court for the Southern District of New York, paint a damning picture. Genesis alleges that DCG and its top brass siphoned off value from the company in its final months, all while giving creditors and investors a false sense of stability.
The complaints claim that DCG treated Genesis like a “corporate ATM,” draining more than a billion dollars through self-serving loans and concealed transfers. At the center of it all, according to Genesis’s Litigation Oversight Committee (LOC), was a strategy to benefit DCG’s prized asset — Grayscale Investments — while pushing Genesis deeper into the red.
A key accusation? DCG allegedly cooked up fake transactions just to create the illusion that Genesis had financial support, when in reality, nothing was backing it. In reality, Genesis was reportedly forced to accept illiquid Grayscale Bitcoin Trust (GBTC) shares as collateral, with restrictions that prevented it from selling them, even after mandatory lock-up periods.
The lawsuit names not just Silbert, but also former Genesis CEO Michael Moro, ex-DCG CFO Michael Kraines, DCG President Mark Murphy, and investment bank Ducera Partners, alleging they all played roles in misleading creditors and enriching insiders.
In a second complaint, Genesis claims DCG and its affiliates quietly withdrew over $1.2 billion in cash and crypto in the year before bankruptcy, mostly during high-stress periods like the Terra-Luna crash and FTX collapse. These transactions reportedly allowed insiders to recover their funds in full, leaving everyday creditors high and dry.
This isn’t the only legal trouble facing DCG and its executives. In April, a New York judge allowed most of the New York Attorney General’s civil fraud case against DCG, Silbert, and Michael Moro to proceed. That lawsuit centers around a 10-year promissory note allegedly used to cover up a $1 billion hole after the Three Arrows Capital meltdown.
Genesis filed for bankruptcy in early 2023 with $14 billion in loans on its books. While it has since settled with Gemini, the fight against DCG and Silbert is far from over.
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