The Digital Currency Group (DCG), which owns the bankrupt cryptocurrency lending operation Genesis Global Capital, has filed a motion to dismiss the lawsuit brought against them by New York Attorney General Letitia James. DCG’s founder and CEO, Barry Silbert, has also filed a motion to dismiss the Attorney General’s accusation that he concealed losses at the firms in order to defraud customers and investors.
The original lawsuit, filed in October of last year and later expanded in February, claims that investors associated with the now-defunct Gemini Earn product and those with direct investments in DCG’s unit, Genesis, were defrauded out of $3 billion. It alleges that DCG and others hid losses incurred during the collapse of crypto firms such as Three Arrows Capital (3AC) and FTX.
The crypto industry has seen a decline in high-yield lending programs, with the partnership between Genesis and crypto exchange Gemini, owned by Tyler and Cameron Winklevoss, being one of the most contentious. DCG has stated that the allegations made in the lawsuit are baseless and unsupported, and have filed a motion to dismiss.
According to the lawsuit filed by the New York Attorney General, DCG and Silbert were aware that loans between them were under-secured and heavily concentrated with FTX’s sister company, Alameda Research. They also allegedly concealed a financial gap through a promissory note between the parent company and Genesis.
DCG has refuted these claims in their dismissal filing, stating that they transferred hundreds of millions of dollars and assets into Genesis, even though they were not obligated to do so. They also dispute the allegation that they took an 18,000 bitcoin loan from Genesis after the collapse of 3AC in 2022, stating that it was merely an administrative consolidation of previous loan agreements.
In addition, Genesis has proposed a settlement deal with the New York Attorney General’s office, which DCG has objected to, calling it a “back-door attempt to circumvent U.S. bankruptcy law.” It is worth noting that the combined value of DCG’s contributions to Genesis equates to 30% of the current value of the estate.
In conclusion, DCG and Silbert are confident that the allegations made by the New York Attorney General are inaccurate and false. They are committed to defending their actions and maintaining the integrity of their businesses.
