By Digital Currency Group (DCG), the parent company of the now-defunct cryptocurrency lending platform Genesis Global Capital, has taken action to dismiss the lawsuit filed against it by New York Attorney General Letitia James.
Additionally, DCG founder and CEO Barry Silbert has filed a motion to dismiss the accusations that he concealed losses at the firms, allegedly leading to the deceit of customers and investors.
DCG and CEO Barry Silbert Seek Dismissal of Lawsuit Alleging $3 Billion Fraud
DCG, along with its founder and CEO, Barry Silbert, filed motions to dismiss the lawsuit on Wednesday, March 3rd. The lawsuit, initially filed in October and later expanded, alleges that investors connected to Gemini Earn, which Genesis ran in partnership with Gemini, were defrauded of $3 billion due to DCG and others concealing losses incurred during the collapse of various crypto firms.
The lawsuit alleges that the companies were aware of under-secured loans and high concentrations with FTX’s sister company, Alameda Research. Additionally, it claims that Digital Currency Group and Silbert concealed financial discrepancies through a promissory note between the parent company and Genesis.
The lawsuit seeks to prohibit Gemini, Genesis, and DCG from operating in the financial investment industry in New York and to secure restitution for investors and the return of any ill-gotten gains.
Genesis suspended withdrawals in November 2022 and filed for bankruptcy in January 2023. This was allegedly due to DCG and others hiding losses incurred during the collapse of crypto firms like Three Arrows Capital (3AC) and FTX.
In response to the lawsuit, DCG has asserted that the allegations are baseless and consist of mischaracterizations and unsupported statements. The company maintains that the claims against it lack merit and are merely attempts to create a narrative of wrongdoing.
“As we have stated from the beginning, the allegations are a thin web of baseless innuendo, blatant mischaracterizations, and unsupported conclusory statements.”
By filing motions to dismiss the lawsuit, DCG and Barry Silbert are seeking to refute the accusations brought forth by the New York Attorney General and challenge the legal basis of the claims made against them.
Digital Currency Group Asserts Contribution of $1.4 Billion to Genesis After 3AC Collapse, Disputes Allegations in Lawsuit
In its dismissal filing, Digital Currency Group (DCG) asserts that misinformation and speculation in the market have led to false beliefs about the company’s actions following the collapse of Three Arrows Capital (3AC) in 2022. Contrary to these beliefs, DCG claims that it actually transferred funds to Genesis after the collapse of 3AC.
According to DCG, in addition to the promissory note, which the company considers fully vetted and binding, it contributed approximately $1.4 billion in cash and other assets to Genesis after 3AC’s downfall.
A DCG spokeswoman clarified via email that DCG transferred hundreds of millions of dollars and assets into Genesis when it had no obligation to do so. At today’s prices, this contribution amounts to around $1.4 billion in cash and coins. According to DCG, this contribution, combined with the $1.1 billion promissory note, represents approximately 30% of the current value of the Genesis estate.
DCG also disputes allegations that it received an 18,000 bitcoin loan from Genesis after the collapse of 3AC in June 2022. Instead, DCG claims that this was an administrative repapering to consolidate prior loan agreements, and no new money left Genesis for DCG.
The spokeswoman emphasized that the allegations in the complaint are inaccurate and often outright false. Adding to the complexity, Genesis proposed a settlement deal with the New York attorney general’s office last month, which DCG later objected to, labeling the proposal as “a back-door attempt to circumvent U.S. bankruptcy law.”
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