DCG sues Genesis over promissory note debt amid bankruptcy challenges
Digital Currency Group (DCG) has sued its lending subsidiary Genesis, asking a bankruptcy court to confirm it is owed more than $105 million plus interest on a financial backstop extended during the 2022 crypto downturn.
The case, filed on Aug. 14 in the U.S. Bankruptcy Court for the Southern District of New York, centers on a $1.1 billion promissory note DCG issued to Genesis after the implosion of hedge fund Three Arrows Capital (3AC).
According to the complaint, 3AC, one of Genesis’s largest borrowers, defaulted on a $2.36 billion margin call in mid-2022, creating a significant deficit in Genesis Asia Pacific’s equity, a DCG-owned entity.
DCG said it injected the note “voluntarily” to stabilize the business, but argued that when crypto markets rebounded, Genesis profited from collateral tied to 3AC far beyond the note’s original value. Those gains, it contends, reduced the principal balance and now leave $105 million outstanding.
In a statement, DCG said it “took extraordinary efforts” to keep Genesis afloat in 2022 and simply wants the court to “confirm” repayment status.
The filing adds another dispute to the strained relationship between the two companies. Earlier this year, Genesis’s litigation oversight committee sued DCG, its CEO Barry Silbert, and other executives, alleging that billions of dollars were wrongfully taken from the lender in 2022.
Genesis, one of several high-profile firms to collapse in the wake of the FTX bankruptcy, halted lending in late 2022 and filed for Chapter 11 protection in early 2023.
It emerged from restructuring last year and began distributing roughly $4 billion to creditors, with recovery amounts varying by asset type. As an equity holder, DCG is among the last to be repaid and has challenged parts of the bankruptcy plan.
The post DCG sues Genesis over promissory note debt amid bankruptcy challenges appeared first on CryptoSlate.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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