Why Digital Currency Group Is Suing Its Own Subsidiary Over $1.1 Billion Loan

Briefly

Digital Foreign money Group has sued its subsidiary Genesis, the now-shuttered crypto lender.
The crypto big claims {that a} $1.1 billion mortgage it made to Genesis was greater than sufficient to cowl its losses following its 2022 collapse—and that the agency has truly profited.
The most recent lawsuit comes after Genesis in Might sued Digital Foreign money Group for $3.1 billion.

Digital Foreign money Group has sued its subsidiary Genesis, claiming that the collapsed crypto lender has truly profited within the long-term following its collapse and subsequent bailout.

In a lawsuit filed Thursday, DCG mentioned that the $1.1 billion mortgage it gave to Genesis in 2022 was finally greater than sufficient to cowl its losses.

Crypto lender Genesis went bankrupt in 2023 because it had lent cash to collapsed crypto agency Three Arrows Capital and different corporations through the bear market and “crypto contagion” that unfold throughout the business in 2022.

DCG stepped in with capital to assist repay Genesis prospects. However in Thursday’s lawsuit, DCG argued that as a result of an increase within the worth of recovered collateral from Three Arrows Capital, its obligations beneath the promissory observe have been decreased to zero.

This, the lawsuit states, is as a result of the belongings from Three Arrows Capital have been in Bitcoin and Grayscale Bitcoin Belief shares which have shot up in worth since 2022.

“Genesis finally suffered no loss from TAC’s default; fairly Genesis has profited by a whole lot of hundreds of thousands of {dollars} (which Genesis is entitled to maintain),” the lawsuit mentioned.

It added: “Due to the numerous appreciation in cryptocurrency values because the petition date, this has resulted in recoveries that exceed the greenback worth of the collectors’ claims as of the petition date.”

Genesis was a crypto lender run by crypto behemoth DCG. It allowed customers to earn money on their crypto holdings by permitting them to be loaned out to others.

Genesis made billions of {dollars} in loans to beleaguered crypto corporations like Three Arrows Capital and the FTX-linked Alameda Analysis, which have been about to default on their debt as a result of market contagion stemming from the collapse of Terra.

When mega digital asset model FTX collapsed, Genesis introduced to shoppers that it will pause withdrawals from its lending arm because of the “unprecedented market turmoil.”

“DCG took extraordinary efforts to voluntarily assist Genesis in 2022, together with by issuing a promissory observe to Genesis to assist shut a possible ebook fairness hole ensuing from the collapse of Three Arrows Capital,” a DCG spokesperson instructed Decrypt on Friday. “We’ve constantly met our contractual obligations beneath that observe, however imagine these have now been totally glad. We’re merely asking the Court docket to substantiate that the legitimate and binding obligation was totally glad.”

Thursday’s lawsuit comes after Genesis in Might sued DCG, alleging that its mum or dad firm and CEO Barry Silbert made fraudulent transfers from the lender because it was collapsing in 2022. It is searching for $3.1 billion in damages.

Editor’s observe: This story was up to date after publication to incorporate an announcement from DCG.