Dispute Emerges From 3AC Collapse and Genesis Bankruptcy
Digital Currency Group (DCG)has filed a lawsuit against its own subsidiaries, Genesis Global Capital and Genesis Asia Pacific, over a $1.1 billion promissory note tied to the fallout of Three Arrows Capital (3AC) in 2022. The case, filed in the U.S. Bankruptcy Court for the Southern District of New York, marks the latest chapter in an ongoing legal battle between DCG and Genesis.
In June 2022, DCG issued a 10-year, $1.1 billion promissory note to Genesis to help stabilize its equity after 3AC’s default created fears of a major liquidity gap. According to DCG, the measure was meant to protect Genesis from collapse.
However, the new complaint argues that Genesis actually profited “hundreds of millions” from the collateral backing 3AC’s loans, primarily shares of Grayscale’s Bitcoin Trust. As crypto markets rebounded, Genesis reportedly recovered $2.8 billion on $2.36 billion in loans tied to 3AC — leaving DCG to claim that its subsidiaries owe repayment.
“Rather than suffering losses, Genesis reaped a massive windfall,” the filing alleged, insisting that payments made on the note must be returned.
Genesis’ legal team strongly disputed DCG’s position. In a statement, counsel Luke Barefoot said:
“DCG’s unfounded, haphazard and convenient about-face to withhold 3AC distributions is meritless. It flatly contradicts the written agreements, DCG’s own representations to the bankruptcy court, and the fact that DCG already handed over more than $100 million in distributions.”
This is not the first legal clash between the two entities. In May, Genesis sued DCG and its CEO Barry Silbert, alleging fraud, insider enrichment, and concealed transfers, seeking $3.3 billion in damages.
Wider Impact of 2022 Crypto Collapses
The dispute stems from the broader crypto market crash of 2022, triggered by the collapse of the Terra ecosystem, followed by cascading bankruptcies including 3AC, FTX, and BlockFi. Genesis itself filed for bankruptcy in January 2023 after halting withdrawals amid market turmoil.
Although Genesis completed a restructuring plan in August 2024, distributing $4 billion to creditors, DCG is now demanding an additional $105 million plus interest through the latest court filing.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.
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