Digital Currency Group (DCG) has filed a lawsuit against its subsidiary, Genesis Global Capital, seeking more than $105 million plus interest in a dispute over a $1.1 billion promissory note issued during the 2022 crypto market crash.
According to a complaint lodged Thursday in the U.S. Bankruptcy Court for the Southern District of New York, DCG says it stepped in to stabilize Genesis after the collapse of hedge fund Three Arrows Capital (3AC), one of Genesis’s largest borrowers. When 3AC defaulted on a $2.36 billion margin call, DCG issued the note to cover what it described as a “hole” in Genesis Asia Pacific’s equity.
The lawsuit claims that, since then, cryptocurrency prices have rebounded sharply, and Genesis has realized “massive gains” from the collateral tied to the 3AC debt — gains DCG argues more than offset the original value of the note. DCG says these recoveries automatically reduced the note’s principal to zero and that the obligation has been fully met.
“We have consistently met our contractual obligations under that note, but believe those have now been fully satisfied,” a DCG spokesperson said. “We are simply asking the Court to confirm” that position.
Genesis’s legal team disagrees. Attorney Luke Barefoot of Cleary Gottlieb called DCG’s move “unfounded” and “convenient,” alleging it contradicts both written agreements and prior statements to the bankruptcy court. He added that DCG has already received over $100 million in distributions.
The lawsuit is the latest flashpoint in a strained relationship between the two companies. In May, Genesis’s Litigation Oversight Committee sued DCG, its CEO Barry Silbert, and other executives to recover billions of dollars the committee claims were improperly diverted in 2022.
Genesis was hit hard by the 2022 crypto market turmoil, which began with the collapse of TerraUSD and was compounded by the downfall of major exchange FTX. After suspending lending operations, the firm filed for bankruptcy in early 2023 and later completed a restructuring plan. Under that plan, Genesis has begun distributing roughly $4 billion in assets to creditors. DCG, as an equity holder, is last in line for repayment and has opposed the bankruptcy terms. Genesis has separately sued DCG for $2.1 billion to cover additional customer claims.
As the legal battles unfold, the case underscores the lasting financial and legal aftershocks from one of the crypto industry’s most turbulent years — and how disputes over rescue measures taken in the heat of the crash continue to reverberate.
