Cryptocurrency lending firm Genesis Global Capital, which filed for bankruptcy earlier this year, has taken legal action against its parent company Digital Currency Group (DCG) in a dispute over unpaid crypto loans, contributing to ongoing turmoil in the crypto industry. Here are the details…
Cryptocurrency company Genesis sues DCG
Genesis Global Capital claims DCG has hundreds of millions of dollars in outstanding loan debt due in May. The loans, totaling over 18,000 bitcoins, were initially created under a “master loan agreement” in 2019. Genesis then converted this debt into a fixed-term loan with a maturity date of May 11, 2023, which DCG allegedly failed to repay. Lawyers representing Genesis also announced that an “amended and restated master loan agreement” was signed between the two parties in November 2022. However, the loans were not paid, causing Genesis to take legal action. In response to these allegations, a DCG spokesperson said:
Genesis agreed to stay the endorsement action so that we could continue to document the agreement in principle reached with the UCC and DCG. We are documenting a leniency agreement and expect to file it with the court shortly. At this point, we will begin the distribution of funds and continue to move toward a significant recovery for Genesis creditors.
Last year’s crashes are behind Genesis’ financial problems
Genesis Global Capital’s financial problems stem from the collapses of crypto hedge fund Three Arrows Capital and exchange FTX last year, which led to it filing for bankruptcy in January. The company owes billions to its creditors, and this legal battle with DCG adds further complexity to its financial woes. This legal dispute is not the only one involving DCG and Genesis Global. Exchange Gemini sued DCG and its CEO, Barry Silbert, in July, accusing them of being responsible for “creditor fraud”. Gemini co-founder Cameron Winklevoss also gave Silbert an ultimatum to pay the $640 million Gemini owes Earn customers or face legal action.
Genesis hopes the recovery of assets, including $500 million in BTC and 4,550 Bitcoins worth about $117 million under four loans, will strengthen its position in ongoing bankruptcy proceedings. However, he stated that he was willing to drop the cases if DCG made staggered payments. The crypto industry continues to face legal challenges and regulatory scrutiny as it matures, and this case between Genesis and DCG is the latest example of the complexities and disagreements in the space.
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