The owner of the bankrupt cryptocurrency lending company Genesis Global Capital, Digital Currency Group (DCG), has filed a motion to have the lawsuit brought against the firms by New York Attorney General Letitia James dismissed. On Wednesday, DCG founder and CEO Barry Silbert filed a motion to have the Attorney General’s allegations against him dropped. The lawsuit, which was first filed in October of last year and later expanded last month, claims that investors in the now-defunct Gemini Earn product and those with direct investments in DCG unit Genesis were defrauded out of $3 billion by DCG and others hiding losses incurred during the collapse of crypto firms like FTX and Three Arrows Capital (3AC).
The complex mass of high-yield loan schemes that formerly dominated the cryptocurrency space has largely disappeared. The largest and most heinous of these was likely the alliance between Genesis and the cryptocurrency exchange Gemini, which is owned by Tyler and Cameron Winklevoss and has sparked a contentious legal dispute.
“Today, DCG and Barry Silbert filed motions to dismiss the meritless civil complaint filed by the New York Attorney General against Gemini, Genesis, and DCG. As we have stated from the beginning, the allegations are a thin web of baseless innuendo, blatant mischaracterizations, and unsupported conclusory statements,” DCG said in a statement.
According to the NYAG lawsuit, DCG and Silbert disguised a significant financial imbalance between the parent company and Genesis through a promissory note, and the firms knew that the loans between them were largely concentrated with FTX’s sister company, Alameda Research, and undersecured.
According to DCG’s dismissal filing, there was market speculation and disinformation circulating that DCG had taken money out of Genesis when 3AC collapsed in 2022. The contrary was really true, according to DCG: according to Wednesday’s filing, almost $1.4 billion in cash and other assets, valued at today’s values, were given to Genesis following 3AC’s collapse, in addition to the promissory note, which DCG describes as a well investigated and legally-binding agreement the company is committed to.
“DCG transferred hundreds of millions of dollars and assets into Genesis at a time it had no obligation to do so,” a DCG spokeswoman said via email. “In fact, at today’s prices, this equates to ~$1.4 billion in cash and coins. This is in addition to the $1.1 billion promissory note that continues to be misunderstood. Together, DCG’s contributions equate to ~30% of the current value of the Genesis estate.”
DCG further refutes claims that following 3AC’s failure in June 2022, the company borrowed $18,000 worth of bitcoin from Genesis. Actually, no new money left Genesis for DCG; this was just an administrative repapering to combine previous loan agreements and DCG claims.
The DCG representative stated, “The allegations are inaccurate throughout the complaint and they are often outright false.”
Genesis last month offered a settlement agreement with the New York attorney general’s office, which parent company DCG later objected to, referring to the idea as “a back-door attempt to circumvent U.S. bankruptcy law” and adding still another level of complexity.