Genesis LOC filed new lawsuit against DCG and Barry Silbert to restore billions of dollars
The Genesis Litigation Oversight Committee (LOC) has launched new legal actions against Digital Currency Group (DCG), CEO Barry Silbert and relevant executives. The lawsuit, filed in two separate jurisdictions, aims to recover billions of dollars, allegedly stolen from cryptocurrency lender Genesis before filing for bankruptcy in early 2023.
Genesis, a former subsidiary of DCG, is one of the most notable casualties in the crypto credit crisis that emerged after the Terra-Luna collapse and wider market decline.
Poor management and fraud in double litigation
One of the lawsuits filed in the Delaware court accused Schiebert and other insiders of “recking” in managing Genesis, claiming they engaged in fraud and self-dealing, which ultimately led to the collapse of the company.
The complaint says Silbert and his affiliates misled creditors about Genesis’ financial situation while benefiting from themselves, DCG and related entities such as Grayscale Investment, although Grayscale itself is not called the defendant. LOC is trying to recover at least $2.2 billion in assets, including Bitcoin, Ethereum and other cryptocurrencies for creditor allocation.
Another lawsuit filed in the Southern District Bankruptcy Court of New York has expanded the charges. It details more than $1 billion suspected fraudulent transfers by DCG and insiders during a period when Genesis is facing “survival risks.”
The lawsuit points out instructions for specific transactions, including $450 million in eight transfers to DCG, sending $297 million in cryptocurrency to DCG International, and $34 million in disputed tax-related payments. According to court documents, the withdrawals occurred during a time when Genesis was already insolvent, with $14 billion in outstanding loans as of the end of 2021.
DCG’s response is a wider industry impact in legal disputes
The documents also referred to warnings issued by external consultant Oliver Wyman in November 2021, which reportedly informed DCG leadership of serious structural risks in Genesis. Despite these warnings, the lawsuit claims that no meaningful steps have been taken to correct the situation.
Genesis finally filed for Chapter 11 bankruptcy in January 2023, listing more than 100,000 creditors with up to $10 billion in liabilities. It completed the restructuring process in August 2023 and began distributing $4 billion in assets to creditors.
DCG responded to the lawsuit, issuing a statement denied the charges. The spokesperson said:
These baseless lawsuits reclaim the same tired, two-year-old claims, and it is an opportunity for experienced investors to extract additional value from DCG. We work sincerely with a wide range of stakeholders in an attempt to achieve a comprehensive solution to the aspects of Genesis bankruptcy and DCG related. We will vigorously defend ourselves against these false claims.
These new legal developments could seriously impact the wider crypto ecosystem, especially as DCG and its associated entities remain major players in the industry. The outcome of these lawsuits may also affect creditor recovery rates and set precedents for future cases involving failures within cryptocurrency groups involving inter-company transfers and corporate governance.
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