Genesis Sues DCG and DCGI for Over $600M in Unpaid Loans
- Bankrupt crypto lender Genesis is trying to recover around $500 million from DCG, and another 4,550.5 BTC from DCGI, which it had loaned to the two companies in 2022.
- Both DCG and DCGI requested that the debts were converted to open loans on 9 May, but Genesis declined both offers and demanded the repayment of the loans with interest.
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Bankrupt crypto lender Genesis Global Capital has filed two lawsuits against affiliated companies DCG and DCGI, seeking the repayment of loans worth more than $600 million, court documents from 6 September show.
According to the two complaints, Genesis lent around $500 million to Digital Currency Group (DCG) in 2022, while Digital Currency Group International (DCGI) received a loan of 18,697.9 Bitcoin (BTC) the same year. Genesis — which filed for bankruptcy this January — is now alleging that both DCG and DCGI are “wrongfully in possession of property” that belongs to its bankruptcy estate, and is looking for the repayment of these debts.
In its first complaint, Genesis explained it had provided the BTC loan to DCGI in June 2022 under an open loan agreement reached in 2019, and in November converted the outstanding balance of the loan — which was partially repaid, with a remaining balance of 4,550.5 BTC — to a fixed-term loan that was due on 11 May, 2023. On 9 May, DCGI requested the debt is converted into an open loan, to which Genesis did not agree.
The second complaint noted that DCG received $500 million from Genesis across four different loans in 2022, which matured on 11 May and 13 May 2023. DCG also requested that its debt is converted into open loans on 9 May, but once again Genesis did not agree to these conditions, and is now looking for the repayment of the loans, as well as late fees and accrued interest. A DCG spokesperson later said in a statement:
“Genesis has agreed to stay the turnover action so that we can move forward with documenting the deal in principle that was reached with Genesis, the UCC, and DCG. We are documenting a forbearance agreement and expect to file it with the court shortly. At that point, we will initiate the distribution of funds and continue on the path to significant recovery for Genesis creditors.”
Genesis filed for bankruptcy back in January, after taking a financial hit from the collapses of crypto hedge fund Three Arrows Capital and the FTX exchange, owing more than $3 billion to its top 50 creditors. Crypto exchange Gemini — which lent customer funds to Genesis through its Earn program — accused DCG and its CEO Barry Silbert of engaging in “fraudulent behavior” in July, claiming they intentionally delayed Genesis’ bankruptcy process through the “abuse” of the mediation process.
- An investigation from the New York Attorney General’s office has allegedly found that Gemini was aware of Genesis’ weak financial position, but still lied to investors.
- The lawsuit is looking to ban DCG, Genesis, and Gemini from the New York financial industry, seek restitutions for investments, and the return of “ill-gotten gains”.
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- Cameron Winklevoss, co-founder of crypto exchange Gemini, proposed a plan that would see Digital Currency Group pay close to $1.5 billion over the next five years.
- The Winklevoss twin said that if the “final offer” is not accepted by the end of the week, Gemini would file a lawsuit against DCG and CEO Barry Silbert.
- Genesis, its parent company Digital Currency Group, the Unsecured Creditors Committee, and Gemini have all agreed to a 30-day mediation process.
- Although supportive of the process, Gemini expressed the “need for urgency” for a final resolution to be reached “as soon as possible”.