On January 19, Genesis, a crypto lending firm and two other subsidiaries engaged in the lending sector, Genesis Asia Pacific and Genesis Global Capital, filed for chapter 11 bankruptcy protection.
Following a recent court confirmation, the first hearing on now-defunct Genesis was set for January 23 at 2:00 PM EST. The case was scheduled to be heard in the Southern District of New York and presided over by Judge Sean H. Lane. But now Genesis creditors have given a new twist to the case.
Beleaguered crypto company Digital Currency Group (DCG) faces more legal issues as its subsidiary Genesis Capital is slapped with a new class action lawsuit. A recent report from a news outlet shows that a group of bankrupt Genesis creditors filed a Securities Class Action (SCA) lawsuit against DCG and its founder and Chief Executive Officer Barry Silbert, citing violations of federal securities laws.
The legal complaint charges that Genesis Capital engaged in a fraudulent scheme, deceiving prospective and current digital asset lenders through false and misleading statements that deliberately distorted the truth about the financial condition of Genesis Global Capital. According to the complainant, Genesis knowingly misrepresented its financial condition in violation of Section 10(b) of the United States Securities Exchange Act.
The lawsuit was filed on January 23, by a law firm based in Stamford named Silver Golub & Teitell LLP (SGT). The case was filed on behalf of individuals and entities that entered into a digital asset lending agreement with Genesis. Reportedly, the law firm is famous for conducting major crypto industry litigation, including a class lawsuit filed in March 2022 against Coinbase.
The lawsuit against DCG and its founders alleges that Genesis Capital engaged in unregistered securities offerings in violation of securities laws by executing securities-linked lending agreements without qualifying for an exemption from registration under federal securities laws.
SGT’s lawyer also added, “The scheme to defraud was carried out, according to the complaint, in order to induce prospective digital asset lenders to loan digital assets to Genesis Capital and to prevent existing lenders from redeeming their digital assets.”
Digital Currency Group is a Stamford, Connecticut-based corporation. It serves as the parent company of a group of digital assets and blockchain technology-focused subsidiaries, including Genesis Capital, Grayscale (world’s largest digital currency asset manager), Luno ( leading digital asset exchange) and many others.
The founder of DCG, Mr. Silbert, currently maintains a 40% equity stake in his firm and serves as chairman of its board of directors.