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Genesis LOC Files New Lawsuits Against DCG and Barry Silbert to Recover Billions

Genesis LOC Files New Lawsuits Against DCG and Barry Silbert to Recover Billions

Samuel Edyme
by Samuel Edyme
3 months ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

The Genesis Litigation Oversight Committee (LOC) has launched a new round of legal action targeting Digital Currency Group (DCG), its CEO Barry Silbert, and associated executives. The suits, filed in two separate jurisdictions, aim to reclaim billions of dollars allegedly misappropriated from the crypto lending firm Genesis before it filed for bankruptcy in early 2023.

Genesis, a former subsidiary of DCG, was among the most high-profile casualties of the crypto credit crisis that unfolded in the wake of the Terra-Luna collapse and broader market downturn.

Related Reading: Class Action Lawsuit Filed Against Strategy Over Alleged Bitcoin Misleading

Allegations of Mismanagement and Fraud Surface in Dual Lawsuits

One of the lawsuits, filed in the Delaware Court of Chancery, accuses Silbert and other insiders of “recklessly” managing Genesis, claiming they engaged in fraud and self-dealing that ultimately led to the company’s collapse.

The complaint alleges that Silbert and his affiliates misled creditors about the financial condition of Genesis while benefiting themselves, DCG, and associated entities such as Grayscale Investments, though Grayscale itself was not named as a defendant. The LOC is seeking to recover at least $2.2 billion in assets including Bitcoin, Ethereum, and other cryptocurrencies for creditor distribution.

A separate lawsuit filed in the Bankruptcy Court for the Southern District of New York expands on these allegations. It details over $1 billion in allegedly fraudulent transfers made by DCG and insiders during a period when Genesis was reportedly facing “existential risk.”

The lawsuit points to specific transactions, including $450 million across eight transfers to DCG, $297 million in crypto sent to DCG International, and $34 million in disputed tax-related payments. According to court documents, these withdrawals occurred during a time when Genesis was already insolvent, with $14 billion in outstanding loans as of late 2021.

DCG Responds as Legal Disputes Raise Broader Industry Implications

The filings also reference a warning issued by external consultant Oliver Wyman in November 2021, which reportedly informed DCG leadership of serious structural risks at Genesis. Despite these warnings, the lawsuits allege that no meaningful steps were taken to correct the situation.

Genesis eventually filed for Chapter 11 bankruptcy in January 2023, listing over 100,000 creditors and up to $10 billion in liabilities. It completed a restructuring process in August 2023 and began distributing $4 billion in remaining assets to creditors.

Related Reading: World’s Largest Crypto Crime Network Collapses After Telegram Crackdown

DCG, in response to the lawsuits, issued a statement rejecting the allegations. A spokesperson stated:

These baseless lawsuits recycle the same tired, two-year old claims in an opportunistic attempt by sophisticated investors to extract additional value from DCG. We worked in good faith with a wide range of stakeholders to try to achieve a comprehensive resolution of the DCG-related aspects of the Genesis bankruptcy. We will vigorously defend ourselves against these spurious claims.

These new legal developments could significantly impact the broader crypto ecosystem, particularly as DCG and its associated entities remain major players in the industry. The outcome of these lawsuits may also influence creditor recoveries and set precedents for future cases involving intercompany transfers and corporate governance failures within crypto conglomerates.

The global crypto market cap valuation on TradingView amid Genesis news
The global digital currency market cap valuation. | Source: TradingView.com

Featured image created with DALL-E, Chart from TradingView

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Samuel Edyme

Samuel Edyme

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Edyme is a writer, a content writer that specialises in writing about the crypto realm. Asides Bitcoinist and NewsBTC, Edyme's writing has been featured in top sites such as Blockchain.News, CoinMonk, Blockchain Reporter, Bitcoin Insider among others.

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