digital currency group

DCG's subsidiary Genesis Capital slapped with new class

A new class action lawsuit has been filed against the cryptocurrency corporation Digital Currency Group (DCG), making the company’s legal woes even more numerous. The claim was filed against DCG’s subsidiary Genesis Capital.

In a securities class action (SCA) lawsuit against DCG and its founder and CEO Barry Silbert, creditors of Genesis allege that the defendants violated laws governing the sale and purchase of securities in the United States.

On behalf of people and companies who engaged into digital asset loan arrangements with Genesis, the legal firm Silver Golub & Teitell (SGT) of Connecticut filed the action. The plaintiffs in the case are seeking compensation for their losses.

The legal company is well-known in the sector for managing important litigation, such as the class action complaint that was brought against Coinbase in March 2022.

In the new complaint filed against DCG and Silbert, it is alleged that Genesis engaged in an unregistered securities offering in violation of securities laws. Specifically, it is alleged that Genesis violated securities laws by executing lending agreements involving securities without first meeting the requirements for an exemption from registration under federal securities laws.

The complaint also claims that Genesis engaged in securities fraud by devising a plan to deceive new and current digital asset lenders by providing false and misleading representations. This is said to have occurred as part of a strategy to steal money.

Plaintiffs allege that Genesis knowingly misrepresented the company’s current financial situation, which constitutes a violation of section 10(b) of the Securities Exchange Act of the United States. ” The scheme to defraud was carried out, according to the complaint, in order to induce prospective digital asset lenders to loan digital assets to Genesis Global Capital and to prevent existing lenders from redeeming their digital assets,” SGT lawyers noted. ” The goal of the scheme was to induce prospective digital asset lenders to loan digital assets to Genesis Global Capital.”

DCG is a cryptocurrency company based in Connecticut that was established in 2015. It functions as the parent company of several digital asset and blockchain-focused subsidiaries, some of which include Genesis, a digital asset manager called Grayscale Investments, a cryptocurrency mining company called Foundry, and a cryptocurrency media outlet called Coindesk.

Silbert, the current CEO of DCG, has a controlling ownership share in the company equal to forty percent and also serves as the chairman of the board of directors for DCG.

The announcement was made as Genesis was in the midst of its first bankruptcy proceedings on January 23, after the company’s first bankruptcy filing on January 19.

The bankruptcy petition was filed a few months after Genesis temporarily ceased withdrawals on November 16 due to the fact that the company had been unable to execute redemption requests in light of the bear market in cryptocurrencies.

It has been revealed that Genesis owes $900 million to the customers of the cryptocurrency trading platform Gemini, which was established by the Winklevoss brothers. Gemini is one of the most significant debtors of Genesis.

Cameron Winklevoss, one of the co-founders of Gemini, went to Twitter on January 20 to announce that the company was ready to take direct legal action against DCG, Silbert, and “those who share culpability for the scam.”

Committee Appointed to Represent Unsecured Creditors in Genesis Global bankruptcy

According to documents filed with the court on February 4, a committee consisting of seven members has been constituted to represent the interests of unsecured creditors in the bankruptcy case involving Genesis Global.

The committee will act as the representatives of the creditors in court, and it will have the right to participate in the restructuring plan as well as the right to be consulted before to key decisions. In most cases, members are chosen at random from a list including the 20 biggest unsecured creditors.

Mirana Asset Management, which is a division of the cryptocurrency exchange Bybit, SOF International, Digital Finance Group, and the cryptocurrency exchange Bitvavo are some of the organisations that have been selected as members, along with three individual creditors: Amelia Alvarez, Richard Weston, and Teddy Andre Amadeo Goriss.

The United States Trustee is an executive branch institution under the Department of Justice that is responsible for managing bankruptcy proceedings. William Harrington, a spokesman for the United States Trustee, was the one who appointed the organisation. In the process of filing for bankruptcy, one of the most significant steps is to establish a committee of creditors.

Bitvavo is one of the largest creditors, having an exposure of more than $290 million; it is followed by Mirana, which has an exposure of $150 million, and Digital Finance Group, which has an exposure of $37 million.

On January 19, Genesis Capital, which includes Genesis Global Holdings and its lending business subsidiaries Genesis Global Capital and Genesis Asia Pacific, filed for bankruptcy, alleging potential liabilities of up to $10 billion.

Two months after discovering liquidity concerns as a result of the failure of the cryptocurrency exchange FTX, the firms filed protection under Chapter 11 of the Bankruptcy Code. Since November 16, 2022, the Genesis Global Capital platform has not allowed for any withdrawals to be processed.

On January 24, a group of creditors filed a securities class-action complaint against the Digital Currency Group, the parent company of Genesis, as well as its creator and CEO, Barry Silbert. The lawsuit alleges that the defendants violated federal securities laws.

In the case, it is alleged that Genesis engaged in securities fraud by concocting a plan to defraud prospective and current lenders of digital assets by making assertions that were false and deceptive. Plaintiffs believe that Genesis knowingly misrepresented its financial status, which they claim constitutes a violation of Section 10 of the United States Securities Exchange Act (b).

Genesis creditor reveals new proposed restructuring plan that will see creditors getting back

According to information provided by a Genesis creditor, the most recent suggested restructuring plan between Genesis, Digital Currency Group, and creditors would result in creditors receiving at least 80 percent of the monies they contributed.

The cryptocurrency trading and market-making arm of Genesis Global will eventually be sold as part of efforts to restructure the company, according to an announcement made by Genesis Global on February 6 stating that it had reached a “agreement in principle” with Digital Currency Group (DCG) and its creditors.

Genesis Global Holdco is the holding company for Genesis, and DCG would give its portion of stock in Genesis Global Trading, which is the brokerage subsidiary business of Genesis, to Genesis Global Holdco.

As a result of the acquisition, all Genesis-related firms would be consolidated under a single holding company.

Under the terms of the transaction, DCG will be exchanging an existing promissory note for convertible preferred shares. The note is for $1.1 billion and has a maturity date of 2032. It will also make its current 2023 term loans, which have a combined value of $526 million, due to creditors when it has refinanced them and increased their aggregate value.

As part of the arrangement, cryptocurrency exchange Gemini will also make a contribution of $100 million to help customers of its Gemini Earn service whose money are now locked with the insolvent company.

Genesis will attempt to put its then-owned Genesis Global Trading business up for sale in the event that it is able to do so prior to the completion of these transactions, which need the required clearance from the court.

The Genesis creditor and crypto yield platform Donut issued a user update on February 6 stating that the plan “has a recovery rate of about $0.80 every dollar invested, with a path to $1.00” for Genesis creditors.

It was also said that the amount that may be recovered is contingent on the “equity note, achieved liquidation prices, and takes into consideration the unknown expenditures connected with the continuation of this bankruptcy.”

The collapse of the cryptocurrency exchange FTX in November caused a liquidity issue at Genesis, which is presently being resolved by the company via the implementation of a reorganisation plan as part of its Chapter 11 bankruptcy proceedings.

At the time of the firm’s Chapter 11 filing, Genesis Global Trading was not mentioned in the paperwork, and Genesis Global Holdco said that the company will “maintain client trading activities.”

During the original bankruptcy hearing that took place in January, attorneys for Genesis said that the business was seeking a speedy resolution to the disagreements that it had with its creditors and expressed optimism that the company would emerge from the Chapter 11 procedures by the end of May.

Digital Currency Group Sells Shares in Subsidiary's Crypto Funds

The cryptocurrency conglomerate known as Digital Currency Group (DCG) is apparently getting ready to generate cash and maintain its liquidity by selling its assets in cryptocurrency funds that are managed by a subsidiary of the company known as Grayscale Investments.

According to a report that was published on February 7 by the Financial Times, which cited United States securities filings, DCG sold approximately one quarter of its shares in Grayscale’s Ether (ETH)-based fund for approximately $8 per share, despite the fact that each share held a claim to nearly double that amount in ETH. The filings were cited in the report.

In addition to this, it is said to have sold down small share parcels in Grayscale’s Litecoin (LTC), Bitcoin Cash (BCH), and Ethereum Classic (ETC)-based trusts. This is in addition to its Digital Large Cap Fund, which is a single fund that invests in Bitcoin (BTC), Ether, Polygon (MATIC), Solana (SOL), and Cardano (ADA).

The response that DCG gave when queried about the share sales was that “it is just part of our regular portfolio rebalancing.”

In spite of this declaration, there are others who feel that Barry Silbert’s DCG might be heading for some kind of financial difficulty.

Another of its companies, the cryptocurrency lending business Genesis Global Capital, filed a bankruptcy petition on January 19 and is reported to owe its creditors more than $3 billion.

Companies controlled by DCG have been significantly impacted by the contagion that has resulted from FTX’s downfall. Over the last several weeks, these companies have been forced to let go of over 500 people.

However, DCG has taken a number of actions to maintain liquidity in 2023, such as informing its shareholders in a letter dated January 17 that it would be discontinuing its quarterly dividend payments as it seeks to improve its balance sheets. This was one of the many initiatives that DCG has done.

After stating that it had received offers for the cryptocurrency media outlet CoinDesk that were greater than $200 million, DCG has reportedly sought the assistance of the financial advisory firm Lazard in order to assist it in weighing up options to sell CoinDesk, which is another of its subsidiaries.

According to the company’s website, DCG’s venture capital portfolio includes about 200 crypto-related startups, some of which include Grayscale, Genesis, and CoinDesk. Additionally, DCG has interest in a number of other businesses, such as the cryptocurrency exchange Luno and the advising company Foundry.

Digital Currency Group Reports Over $1 Billion Loss Due to 3AC Collapse

Digital Currency Group (DCG), a cryptocurrency venture capital conglomerate, has reported losses of over $1 billion in 2022. The losses were primarily due to the collapse of Three Arrows Capital (3AC), a crypto hedge fund that DCG had invested in, and falling cryptocurrency prices.

According to DCG’s Q4 2022 investor report, the losses were mainly caused by the impact of 3AC’s default on Genesis, DCG’s lending arm. Genesis filed for Chapter 11 bankruptcy in late January, as it was 3AC’s largest creditor, having loaned the now-bankrupt hedge fund $2.36 billion. 3AC filed for bankruptcy in July 2022.

DCG’s fourth-quarter losses came to $24 million, while revenues came in at $143 million. Full-year revenues for DCG came in at $719 million, with total assets of $5.3 billion. DCG’s cash and liquid holdings amounted to $262 million, and its investments, such as shares in its Grayscale trusts, amounted to $670 million. The remaining assets were held by divisions of its asset management subsidiary Grayscale and DCG’s Bitcoin (BTC) mining business, Foundry Digital.

DCG’s equity valuation came in at $2.2 billion, with a price per share of $27.93, which the report said was “generally consistent with the sector’s 75%-85% decline in equity values over the same period.” However, the company said it “hit a milestone” with the restructuring of Genesis.

In February, DCG proposed an agreement that would see its equity share in Genesis’ trading entity contributed and all Genesis entities brought under the same holding company, with its trading entity sold off. DCG would also exchange an existing $1.1 billion promissory note due in 2032 for convertible preferred stock, and its existing 2023 term loans with an aggregate value of $526 million would be refinanced and made payable to creditors.

According to a Genesis creditor, the plan “has a recovery rate of approximately $0.80 per dollar deposited, with a path to $1.00” for those owed money by the firm.

DCG declared on November 1, 2021, that its valuation was more than $10 billion, following the sale of $700 million worth of shares to companies like Alphabet Inc., Google’s parent company. However, the recent losses have brought its valuation down significantly.

The collapse of 3AC and Genesis’ subsequent bankruptcy filing has had a major impact on DCG’s financials. The company will need to continue to navigate the volatile cryptocurrency market and work towards resolving its outstanding liabilities to regain investor confidence.

Genesis Capital's Settlement Disrupted by Creditors

Genesis Capital, a troubled digital currency company, has hit another roadblock in its settlement process, just two months after reaching an initial agreement with creditors. The company’s parent firm, Digital Currency Group (DCG), has issued a statement on Twitter announcing that Genesis has filed a motion for mediation due to renewed demands from creditors.

In February, Genesis Capital submitted a comprehensive settlement proposal to the bankruptcy court after reaching an “agreement in principle” with DCG and its creditors. Under the proposed restructuring plan, Genesis creditors were expected to recover 80% of funds lost due to the company’s collapsed operations.

However, DCG has now reported that Genesis creditors have raised their demands, significantly disrupting the ongoing court process. “While it is difficult to understand the rationale given the limited engagement from Genesis creditors since the February court filing, our understanding is that a subset of creditors have decided to walk away from the prior agreement,” DCG wrote.

The disruption has raised concerns about the timing of the settlement process, with some experts questioning whether the prolonged proceedings could harm the company’s chances of recovery. However, others have suggested that the additional mediation may ultimately help resolve outstanding issues and pave the way for a successful restructuring.

Genesis Capital’s struggles come amid broader uncertainty in the digital currency market, with many investors and companies grappling with regulatory challenges and price volatility. The company’s difficulties are particularly notable given its high profile in the industry; Genesis has been a leading provider of digital asset lending and borrowing services, with a portfolio of more than $15 billion in assets.

Despite these challenges, DCG expressed confidence in Genesis’ ability to weather the storm. “We believe that Genesis is well-positioned to continue to provide best-in-class digital asset services,” the company wrote. “We remain committed to working through these challenges in partnership with our creditors and the broader digital asset community.”

The case underscores the challenges facing digital currency companies as they navigate a rapidly evolving regulatory landscape and seek to establish themselves as viable players in the broader financial ecosystem. With Genesis’ future hanging in the balance, the industry will be closely watching to see how the settlement process unfolds in the coming months.

Barry Silbert Resigns from Grayscale Investments Board Amidst Industry Challenges

Grayscale Investments, a leading cryptocurrency trust manager, has announced the resignation of Barry Silbert from its board of directors. Silbert, recognized as the founder and CEO of Digital Currency Group (DCG), the parent company of Grayscale, officially stepped down as of January 1, 2024. This move comes amidst a challenging period for the crypto industry, particularly following the 2022 market downturn.

Grayscale Investments has been at the forefront of advocating for the conversion of the world’s largest Bitcoin trust into an exchange-traded fund (ETF). The company’s ambition to gain U.S. approval for this conversion adds a significant backdrop to the board changes. Moreover, the resignation of Mark Murphy, the President of DCG, from the Grayscale board adds to the reshuffling of the firm’s leadership. Silbert’s departure is succeeded by Mark Shifke, DCG’s Chief Financial Officer, indicating a strategic realignment within the organization.

The timing of these resignations is crucial, given the looming SEC decision on a spot Bitcoin ETF application filed by ARK Investment Management LLC and 21Shares, scheduled for January 10. Grayscale’s application for a GBTC conversion is also under the regulator’s consideration. This scenario underscores the pivotal role Grayscale plays in the broader context of cryptocurrency investment and regulation.

The departures occur amid legal battles involving DCG. The conglomerate faces lawsuits from U.S. regulators over a lending program by its former unit, Genesis Global Capital, and Gemini Trust Co. These legal issues have cast a shadow over the firm, with Silbert personally named in a lawsuit filed by New York Attorney General Letitia James concerning the disclosure of risks in a crypto-lending program.

Grayscale has responded to these challenges by expanding its board. Matthew Kummell, Senior Vice President of Operations at DCG, and Edward McGee, CFO of Grayscale, have joined the board. Grayscale CEO Michael Sonnenshein remains a board member. This expansion is indicative of Grayscale’s commitment to navigating the evolving landscape of cryptocurrency investments and regulations.

DCG Completes Payment of Short-Term Debts to Dissolved Crypto Lender Genesis

DCG Resolves Debts Amid Turbulence in the Crypto Sector

The Digital Currency Group (DCG), a key player in the cryptocurrency sector, has accomplished a big milestone by paying off all of its short-term loans to Genesis, a bitcoin lending platform that has since been dissolved. In the continuous tale of bitcoin business issues and attempts to restructure, this signals a significant milestone that is of critical importance.

The Beginning of the Process of Dissolution, Beginning with Suspension

During the month of November 2022, Genesis, which had previously been a prominent bitcoin lending platform, had a significant setback when it ceased withdrawals. The turbulent circumstances in the cryptocurrency market were the driving force behind this decision, which ultimately resulted in Genesis declaring for bankruptcy in January of 2023. In the months leading up to its bankruptcy, Genesis was struggling under the weight of significant debts, with its top fifty creditors owing more than $3.5 billion alone.

Strategy for Commitment and Repayment Employed by DCG

A promise was made by DCG in November 2023 to settle all outstanding commitments to Genesis by April 2024. This pledge was made in the midst of very difficult circumstances. Barry Silbert, the Chief Executive Officer of DCG, said that the company was able to successfully fulfill these loan commitments despite the challenging environment that prevailed in the cryptocurrency market for the whole year of 2023.

Recent confirmations from DCG have shown that Genesis has received funds in the amount of around 700 million dollars. The greater sum of more than one billion dollars that was delivered to creditors throughout the course of the previous year includes this amount as a component. DCG’s efforts to stabilize its business and stick to its promises in a market that is volatile are shown by this hefty payment.

Repercussions and Prospects for the Future

The continuing reorganization and realignment that is taking place inside the cryptocurrency industry is brought to light by the breakup of Genesis and the repayment by DCG for their debt. The problems that bitcoin firms have in managing market swings and ensuring financial stability are brought into sharper focus by these occurrences. In addition, the successful settlement reached by DCG may serve as a model for other organizations who find themselves in a scenario like to their own, providing a look into possible recovery paths in the unpredictable cryptocurrency market.

FTX Seeks Court Approval to Sell $175M Genesis Claim Amid Bankruptcy Proceedings

FTX has initiated a significant legal maneuver by filing a motion in a Delaware court to sell its $175 million claim against Genesis Global Capital. This action comes in the wake of Genesis Global Capital declaring bankruptcy, with FTX and its associated hedge fund, Alameda Research, directly impacted. The claim, originally lodged by Alameda Research, forms a part of FTX’s broader strategy to navigate its post-collapse financial recovery. FTX’s move to sell the claim, either in full or in parts and potentially across different occasions, aims to optimize market conditions to maximize returns from the sale.

The claims against Genesis are currently trading at 65% of their face value, a figure notably higher than the 38% value attributed to Alameda Research claims. FTX’s motion outlines a proposed sales procedure designed to streamline the process, ensuring that the sale price is no less than 95% of the highest quoted price by leading market-makers for Genesis Global Capital’s general unsecured claims within a specified timeframe around the sale date. This strategic decision underscores FTX’s intent to alleviate the financial complexities and delays typically associated with the sale of such claims, highlighting the motion’s rationale as being in the best interest of all parties involved, including debtors, creditors, and other stakeholders.

The backdrop to this motion is FTX’s initial effort to recoup $3.9 billion from Genesis under bankruptcy law provisions, a sum that was later negotiated down to $175 million in a settlement reached between the two entities in August 2023 and approved by the court in October of the same year. This settlement effectively extinguished other claims FTX had against Genesis, with both parties citing the unpredictable nature of potential recoveries and the desire to avoid lengthy and costly litigation as key reasons for the reduced claim amount.

This development is part of a larger narrative involving FTX’s collapse in November 2022 due to accounting irregularities, which sent shockwaves through the cryptocurrency market. Genesis Global Capital, with $175 million tied up in FTX accounts at the time, insisted that this did not affect its market-making activities. However, Genesis’s own bankruptcy filing in January 2023 and subsequent legal entanglements, notably with the Gemini cryptocurrency exchange over the Gemini Earn program, further complicate the situation. Genesis’s recent $21 million settlement with the SEC over issues related to Gemini Earn is a critical element in its ongoing bankruptcy reorganization efforts.

A court hearing scheduled for February 14 in New York will be a pivotal moment, as it will consider the inclusion of the SEC settlement in Genesis’s proposed bankruptcy reorganization plan. This hearing represents a significant step in the unfolding legal drama surrounding Genesis Global Capital’s bankruptcy and its broader implications for the cryptocurrency industry.