Key takeaways:
- A group of creditors has filed a new class action lawsuit against Genesis.
- The announcement was made when Genesis was undergoing its initial bankruptcy proceedings on January 23, following its bankruptcy filing on January 19.
A new class action complaint was filed against Digital Currency Group (DCG), a troubled cryptocurrency corporation, on behalf of its subsidiary Genesis Capital.
Genesis creditors accused DCG and its CEO Barry Silbert of breaking the law when they launched a securities class action (SCA) case against DCG.
Silver Golub & Teitell (SGT), a Connecticut law firm, brought the complaint on behalf of people and organizations that signed financing contracts with Genesis for digital assets. The law firm has a reputation for managing significant industry cases, including one brought in March 2022 against Coinbase as part of a class action.
Genesis executed lending agreements involving securities without being eligible for an exemption from registration under the federal securities laws, according to the new complaint against DCG and Silbert. This allegedly constituted an unregistered security offering in violation of the securities laws.
The company has been sued for securities fraud. The lawsuit alleges that Genesis committed securities fraud by making false and misleading statements regarding the use of digital asset financing. Plaintiffs contend that Genesis intentionally misrepresented Genesis’ financial situation, violating section 10(b) of the US Securities Exchange Act. SGT lawyers stated:
“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 Global Capital and to prevent existing lenders from redeeming their digital assets,”
DCG, a cryptocurrency company based in Connecticut, was established in 2015. It is the parent company of several companies involved with blockchain technology and digital assets, such as Genesis, Grayscale Investments, Foundry, and Coindesk. Silbert, the company’s current CEO, also chairs the board of directors and holds a 40% stock share in DCG.
The announcement coincides with Genesis’ initial bankruptcy proceedings, which were held on January 23 after the company filed for bankruptcy on January 19. A few months had passed since Genesis stopped accepting withdrawal requests on November 16 due to its inability to fulfill redemption requests amid the bear cryptocurrency market.
One of Genesis’ largest debtors is Gemini, the Winklevoss twins’ cryptocurrency trading platform, which is said to owe Gemini’s customers $900 million. Whether Gemini is a party to the lawsuit, SGT filed is yet unknown.
