{"id":15075,"date":"2025-08-16T09:28:38","date_gmt":"2025-08-16T07:28:38","guid":{"rendered":"https:\/\/wsj-crypto.com\/?p=15075"},"modified":"2025-08-16T09:28:38","modified_gmt":"2025-08-16T07:28:38","slug":"digital-currency-group-takes-legal-action-against-subsidiaries-over-1-1-billion-debt-dispute","status":"publish","type":"post","link":"https:\/\/wsj-crypto.com\/index.php\/2025\/08\/16\/digital-currency-group-takes-legal-action-against-subsidiaries-over-1-1-billion-debt-dispute\/","title":{"rendered":"Digital Currency Group Takes Legal Action Against Subsidiaries Over $1.1 Billion Debt Dispute"},"content":{"rendered":"

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Update (Aug. 15 at 11:40 pm UTC): This article has been revised to incorporate a statement from Genesis’ legal representative.<\/p>\n

The venture capital firm Digital Currency Group (DCG), the parent entity of numerous organizations associated with cryptocurrency and blockchain, has lodged a complaint against two of its subsidiaries regarding a promissory note aimed at mitigating the 2022 default of Three Arrows Capital (3AC).<\/p>\n

In a filing on Thursday in the US Bankruptcy Court for the Southern District of New York, DCG claimed that Genesis Global Capital and Genesis Asia Pacific, both part of the venture capital group, owed their parent company excess payments based on recoveries from 3AC.<\/p>\n

The complaint indicated that DCG provided a $1.1 billion promissory note to the Genesis entities, which earned \u201chundreds of millions of dollars\u201d without incurring any losses from 3AC’s default in 2022.<\/p>\n

According to DCG, the firm issued a 10-year promissory note to Genesis Global Capital in June 2022 as a precaution against any potential \u201cgap\u201d in Genesis Asia Pacific’s equity that could have arisen from the failure of 3AC, one of Genesis’ borrowers. DCG asserted that instead of encountering significant liquidity challenges from 3AC, Genesis \u201creap[ed] a massive windfall\u201d and was required to return payments made on the promissory note.<\/p>\n

Digital Currency Group complaint against Genesis. Source: US Bankruptcy Court for the Southern District of New York<\/em><\/figcaption><\/figure>\n

The recent complaint marked yet another legal confrontation between DCG and Genesis regarding the fallout from 3AC\u2019s demise. In May, Genesis initiated lawsuits against its parent entity, affiliates, and CEO Barry Silbert, asserting claims of fraud, insider enrichment, and undisclosed transfers. The firm sought $3.3 billion from DCG<\/a>, alleging that the latter withdrew funds prior to Genesis\u2019 bankruptcy.<\/p>\n

\u201cDCG\u2019s unfounded, erratic and convenient reversal to withhold 3AC distributions is baseless,\u201d remarked Luke Barefoot, a partner at the law firm Cleary Gottlieb and counsel to Genesis, in a statement to Cointelegraph. \u201cIt plainly contradicts the written agreements, DCG\u2019s claims to the bankruptcy court, and the fact that DCG has already distributed $100M+.\u201d<\/p>\n

Related: <\/strong><\/em>FTX users bolster lawsuit claiming law firm was \u2018key\u2019 to FTX fraud<\/strong><\/em><\/a><\/p>\n

The $1.1-billion promissory note referenced in the filing was issued in response to the fall of 3AC, with Genesis potentially facing a deficit in its equity for the second quarter of 2022.<\/p>\n

However, DCG noted that \u201ccryptocurrency prices ultimately recovered,\u201d enabling Genesis to utilize 3AC\u2019s collateral \u2014 shares of Grayscale\u2019s Bitcoin Trust, which appreciated in value alongside the cryptocurrency \u2014 to profit from the loans.<\/p>\n

\u201c[T]he additional amounts accrued by Genesis following the issuance of the Note were, based on the pleadings filed by Genesis in this Court seeking endorsement of that transaction, far more than sufficient to address the preceding $1.1 billion collateral deficit\u2014and, on information and belief, permitted Genesis to profit from [3AC]\u2019s default by reclaiming nearly $2.8 billion on the original $2.36 billion in [3AC] Loans,\u201d stated the filing.<\/p>\n