Genesis Sues DCG Over $3.3 Billion in Alleged Fraudulent Transfers

Highlights:

• Genesis seeks over $3 billion, alleging DCG hid risks and drained funds before bankruptcy.
• The lawsuits claim DCG moved more than cash during major crypto market crashes.
• The court has allowed most claims against DCG to proceed as Genesis fights for creditor recovery.

Genesis has filed two lawsuits to recover more than $3.3 billion in assets it claims were wrongfully taken. The lawsuits claim that Digital Currency Group (DCG), CEO Barry Silbert, and others transferred funds and hid financial risks as the company’s condition worsened in 2022. Genesis says the alleged misconduct left creditors exposed while insiders avoided losses. The filings argue that these actions directly harmed lenders and investors.

Genesis sues parent company DCG over $1B in disputed transfers

Crypto lender Genesis Global Capital has filed a lawsuit against its parent company, Digital Currency Group (DCG), seeking to recover over $1 billion in transfers made before its bankruptcy filing, Bloomberg Law…

— CoinNess Global (@CoinnessGL) May 20, 2025

The Delaware Chancery Court, a non-jury trial court, unsealed a complaint yesterday that alleged that DCG, the parent company of Genesis, used Genesis to self-enrich itself. Executives, including Silbert, allegedly concealed losses after the collapse of Three Arrows Capital. DCG issued a 10-year, $1.1 billion promissory note in 2022. The note had a 1% interest rate and offered no real liquidity.

The petition argues that Genesis carried out its activities without being checked by any independent board. It allowed DCG to make financial moves that further damaged Genesis. The report from Genesis claims the accused tried to prevent panicking creditors by manipulating the reports. The collapse was triggered by a drop in the value of LUNA and TerraUSD.

The Litigation Oversight Committee acts as a representative for creditors during the case. They believe that DCG prioritized its stability over that of Genesis. At that point in time when Genesis filed for bankruptcy, the lender had outstanding loans totaling over $14 billion.

Genesis Sues DCG For Moving Funds During Market Chaos

The second lawsuit filed in the US Bankruptcy Court for the Southern District of New York accuses DCG of taking over $1.2 billion in assets from Genesis before declaring bankruptcy. They occurred during big events like the failures of FTX and Terra-Luna. The New York bankruptcy filing outlines several payments to DCG and its affiliates.

The complaint also lists $101 million sent to HQ Enhanced Yield Fund. Genesis argues that these were preferential transfers made after the lender became insolvent. In addition, $34 million in tax-related payments to DCG are considered fraudulent. Creditors say insiders recovered all their funds.

The lawsuit says Genesis was forced to accept Grayscale Bitcoin Trust shares as collateral. These shares had a six-month lockup period and could not be sold. Even after the restriction ended, Genesis was not allowed to sell them. This raised valuation risks for the company.

The Litigation Oversight Committee says Genesis creditors are owed about $2.2 billion. These include 19,086 Bitcoin, 69,197 Ether, and over 17 million tokens across other virtual assets. Genesis also claims that DCG manipulated transactions at quarterly deadlines. These transactions were meant to mislead creditors about the company’s liquidity.

Legal Battle Intensifies as Court Advances Claims

Genesis accuses DCG again as the other lawsuits move forward in court. A New York judge ruled in April 2025 that most civil claims from the Attorney General could proceed. The lawsuit focuses on misleading practices following the collapse of Three Arrows Capital. 

In addition, the SEC reached separate settlements with DCG and Michael Moro in January for misleading the investors of Genesis about the exposure they faced by the collapse of Three Arrows Capital. Meanwhile, they decided to cover a fine of $38 million without accepting responsibility for any misconduct.