Digital Currency Group is demanding over 105 million dollars, including interest, from its bankrupt subsidiary Genesis, related to a 1.1 billion dollar internal loan granted in 2022 to stabilize the company after the collapse of Three Arrows Capital.
Friction between Digital Currency Group and Genesis Global Capital
The rift reignites between Digital Currency Group (DCG) and its bankrupt subsidiary Genesis Global Capital. This time, the parent company is seeking more than 105 million dollars, including interest, as repayment for a former 1.1 billion dollar rescue package set up in the midst of the 2022 crypto storm.
A $2.36 billion hole after Three Arrows Capital
Back in 2022: the collapse of the hedge fund Three Arrows Capital (3AC), one of Genesis’s largest borrowers, leads to a default of 2.36 billion dollars. Result: a massive gap in the accounts of Genesis Asia Pacific (GAP), the lender’s Asian branch.
To prevent implosion, DCG then voluntarily injects a promissory note of 1.1 billion dollars, with no obligation, to stabilize the subsidiary and limit the domino effect in a market already shaken by the downfall of TerraUSD and the imminent crash of FTX.
Massive gains… and a disputed repayment
The issue for DCG: since this intervention, the crypto market has rebounded. Genesis has garnered significant gains on assets related to 3AC, called TAC Recoveries, surpassing the initial note amount by far.
According to the complaint, these gains should have automatically reduced the debt on a “dollar for dollar” basis. As a result, DCG believes that Genesis now has the funds to immediately repay over 105 million dollars.
An endless legal battle
This new episode adds to a series of explosive legal procedures. Last May, the Genesis Litigation Oversight Committee sued DCG, its CEO Barry Silbert, and other executives, to recover several billion dollars allegedly misappropriated in 2022.
Genesis, on the other hand, also sued its parent company for 2.1 billion dollars to reimburse its aggrieved clients. The company, which froze its lending operations after FTX’s collapse, filed for bankruptcy in 2023 before finalizing its restructuring a year later. It began distributing 4 billion dollars in assets to its creditors, with varying recovery rates depending on the crypto-assets. As a shareholder, DCG remains last in line to be paid.
