Digital Currency Group (DCG), one of the most influential firms in the crypto industry, has taken two of its own subsidiaries to court in a dispute tied to the collapse of hedge fund Three Arrows Capital (3AC).
In a filing submitted Thursday to the U.S. Bankruptcy Court for the Southern District of New York, DCG accused Genesis Global Capital and Genesis Asia Pacific of owing repayments connected to a $1.1 billion promissory note.
The note was issued in June 2022 at the height of market turmoil, intended as a safeguard in case Genesis Asia Pacific suffered a major equity shortfall after 3AC defaulted on its loans.
According to DCG, however, Genesis never experienced the severe liquidity crunch originally feared. Instead, the subsidiaries allegedly profited by “hundreds of millions of dollars” from collateral tied to the loans, leaving DCG arguing that it is entitled to recover payments made on the note.
DCG claims that Genesis was able to seize 3AC’s collateral — including shares of Grayscale’s Bitcoin Trust — which rebounded in value alongside Bitcoin’s recovery. Court documents allege that Genesis ultimately recouped nearly $2.8 billion on $2.36 billion in loans, turning what was expected to be a damaging default into a windfall. DCG is now seeking more than $105 million plus interest from its subsidiaries.
The complaint adds another layer to the already tangled legal disputes between parent and subsidiary. In May, Genesis filed lawsuits against DCG, its affiliates, and CEO Barry Silbert, accusing them of fraud, insider enrichment, and improper fund transfers. Genesis argued that its parent company drained billions before its bankruptcy, a claim DCG strongly disputes.
Genesis’ collapse was part of the domino effect triggered by 2022’s market crash, following the implosions of Terra and 3AC. The turbulence eventually spread to FTX, whose bankruptcy deepened the crisis and accelerated liquidity crunches across the sector. Genesis Global Capital filed for bankruptcy in January 2023 after halting withdrawals, later completing its restructuring in August 2024 with roughly $4 billion returned to creditors.
With DCG now suing its own subsidiaries, the legal saga surrounding Genesis, 3AC, and the fallout of the 2022 crash continues to weigh heavily on the crypto industry’s path toward stability.
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Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
Source: https://coindoo.com/dcg-demands-105m-from-genesis-after-3ac-collapse/