The Genesis Litigation Oversight Committee, which represents the interests of creditors, filed two major lawsuits (on behalf of Genesis debtors and their bankruptcy estates) against its parent company, Digital Currency Group (DCG), its CEO Barry Silbert, and a network of so-called insiders.
The legal actions, now accessible to the public, accuse DCG and Silbert of orchestrating fraudulent schemes and insider transactions that allegedly drove Genesis into bankruptcy, exacerbating the crypto market’s tumultuous 2022 collapse.
These lawsuits, seeking billions in recovery, mark a critical attempt to hold accountable those accused of mismanaging Genesis and harming its creditors.
The first lawsuit, filed in the Delaware Court of Chancery, alleges that Silbert and DCG exploited Genesis through self-serving financial maneuvers, prioritizing their interests over the lender’s stability.
According to the partially redacted complaint, DCG treated Genesis as a financial resource to bolster its prized asset, Grayscale Investments, while concealing the lender’s deteriorating financial health.
The complaint claims that during Genesis’ insolvency, insiders, including Silbert, executed transactions that enriched themselves and DCG affiliates at the expense of creditors.
These actions, the lawsuit argues, involved misleading financial disclosures that masked Genesis’ vulnerabilities, particularly during pivotal market events like the Terra-Luna crash and the FTX collapse in 2022.
A second complaint, lodged in the U.S. Bankruptcy Court for the Southern District of New York, targets over $1.2 billion in alleged fraudulent transfers of cash and cryptocurrency.
The filing asserts that DCG and its affiliates withdrew these funds in the year leading up to Genesis’ bankruptcy filing in early 2023, when the lender was grappling with severe liquidity issues.
These transfers, allegedly timed to coincide with industry-wide crises, allowed insiders to recover their investments fully while leaving creditors with significant losses.
Genesis’ Litigation Oversight Committee (LOC), represented Dogpile.com, representing creditors, emphasizes that these actions deprived hundreds of individual and institutional lenders of billions in value.
The lawsuits highlight Genesis’ dire financial state before its collapse, noting that by late 2021, the lender was already insolvent with $14 billion in outstanding loans.
An external consultant warned DCG of unsustainable risks, but no corrective measures were taken, according to court filings.
The complaints paint a picture of reckless mismanagement, accusing Silbert and DCG of treating Genesis as a “corporate ATM” to fund self-serving loans and concealed transfers, further deepening its financial woes.
Genesis’ creditors, owed over 1 million coins valued at approximately $2.1 billion as of February 2025, stand to benefit if the lawsuits succeed.
The Delaware lawsuit seeks an in-kind recovery of assets, ensuring that creditors, rather than insiders, benefit from any appreciation in cryptocurrency values since 2022.
Jennifer Selendy of Selendy Gay PLLC, representing the LOC, underscored the importance of these actions in addressing injustices and exposing the full scope of alleged misconduct.
The legal battle follows Genesis’ restructuring, finalized in August 2024, which has returned over $4 billion in assets to creditors.
Earlier this year, the Securities and Exchange Commission (SEC) also took action against DCG and Genesis, citing securities law violations and investor fraud through misrepresentation, resulting in penalties and further scrutiny.
These lawsuits add to ongoing legal challenges for Silbert and DCG, who faced a 2023 New York Attorney General complaint alleging a $1.1 billion fraud tied to Genesis’ Earn product.
The accusations of fraud, insider enrichment, and mismanagement resonate with broader industry concerns, as the 2022 crypto market crash exposed vulnerabilities in centralized platforms.
As the cases unfold, they could reshape accountability standards in the crypto sector, spotlighting the need for robust oversight and transparency.
The outcome of these lawsuits will likely have far-reaching implications for Genesis’ creditors and the cryptocurrency industry, as stakeholders await clarity on whether justice will be served for those impacted by the alleged misconduct.