Genesis Slams DCG with $3.1B Lawsuit—Crypto’s ’Trustless’ System Shows Its Teeth
Genesis Capital drops the hammer on Digital Currency Group, demanding repayment of over $3.1 billion in disputed notes and asset transfers. The lawsuit alleges DCG failed to honor obligations—ironic for an industry built on ’smart’ contracts.
This isn’t your grandma’s debt collection notice. The filing reads like a crypto thriller: nine-figure sums, opaque transactions, and the kind of financial maneuvering that’d make a Wall Street quant blush. Proving once again that in decentralized finance, the only thing truly decentralized is accountability.
While DCG claims it’ll ’vigorously defend’ itself, the crypto markets are watching closely. After all, when a lender this big starts swinging, even Bitcoin maximalists pause their ’number go up’ chants. The case could set precedent for how crypto bankruptcies play out—assuming anyone can actually follow the money trail.
Promises and losses
Central to the Delaware filing is DCG’s issuance of a 10-year, $1.1 billion promissory note in 2022, meant to cover Genesis’s losses from Three Arrows Capital’s default.
The note had a 1% interest rate and allegedly failed to provide real liquidity.
The lawsuits are backed by the Genesis Litigation Oversight Committee (LOC), appointed by the bankruptcy court to represent creditors’ interests.
The committee claims the defendants spread misleading information and false financial reports to prevent a bank run and profit from the failing lender before its collapse.
The first signs of a bank run "appeared on May 7, 2022," the Delaware complaint reads.
"Within three days, LUNA’s price per coin dropped from $80 to almost zero," with the tokens involved (TerraUSD and LUNA) becoming "essentially worthless" and erasing $45 billion in value at the time.
Transfers and recovery
Genesis filed a separate federal bankruptcy complaint in New York, detailing over $1.2 billion in allegedly preferential transfers to DCG and insiders before its Chapter 11 filing in January 2023.
Those transfers included $448 million to DCG, $136 million to DCG International, and $101 million to HQ Enhanced Yield Fund, among others.
Genesis also claims that $34 million in tax payments to DCG were fraudulent and is seeking in-kind recovery of over 19,000 BTC, 69,000 ETH, and 17 million tokens across other digital assets.
DCG and former Genesis CEO Michael Moro agreed in January 2025 to pay $38 million to settle SEC charges that they misled investors about Genesis’s exposure to the collapse of Three Arrows Capital.
The SEC said DCG created a “materially false impression” of the lender’s financial health after the default, while neither party admitted nor denied the allegations.
By May 2024, Genesis had reached a proposed $2 billion settlement with DCG, though litigation remains ongoing.
"It’s almost comically tragic: billions of dollars swirling between so-called ’industry leaders’ who are supposed to set the standard, yet we’re still debating the basics of fiscal responsibility and fiduciary duty," Rossow said.
Edited by Sebastian Sinclair
