Genesis Creditors File Lawsuit Against Barry Silbert and Digital Currency Group

Struggling cryptocurrency firm Digital Currency Group (DCG) is facing further legal trouble as its subsidiary Genesis Capital has been hit with a new class action lawsuit.

A group of Genesis creditors filed a securities class action (SCA) lawsuit against DCG and its founder and CEO Barry Silbert, alleging violations of federal securities laws.

The demand was presented by the law firm Silver Golub & Teitell (SGT), based in Connecticut, on behalf of individuals and entities that have entered into digital asset lending agreements with Genesis. The law firm is known for handling major industry lawsuits, including a class action lawsuit filed against Coinbase in March 2022.

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The new complaint against DCG and Silbert alleges that Genesis engaged in an unregistered securities offering in violation of securities laws by executing securities lending agreements without being entitled to an exemption from registration under the federal securities laws. .

The lawsuit also alleges that Genesis engaged in securities fraud through a scheme to defraud potential and existing digital asset lenders by making false and misleading statements. According to the plaintiffs, Genesis intentionally misrepresented its financial position, in violation of section 10(b) of the United States Securities Exchange Act.

“The scheme to defraud was carried out, according to the complaint, in order to induce potential digital asset lenders to lend digital assets to Genesis Global Capital and to prevent existing lenders from redeeming their digital assets,” the attorneys for SGT.

Founded in 2015, DCG is a Connecticut-based crypto company that serves as the parent company of multiple subsidiaries focused on digital assets and blockchain, including Genesis, digital asset manager Grayscale Investments, cryptocurrency mining company Foundry, and news outlet Coindesk cryptocurrencies. DCG’s current CEO, Silbert, holds a 40% majority stake in the company and is also chairman of its board of directors.

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The news comes amid the first hearings in the Genesis bankruptcy case on January 23, after the company filed for bankruptcy on January 19. The bankruptcy filing came a few months after Genesis halted withdrawals on Nov. 16 as it was unable to meet payment requests amid the cryptocurrency bear market.

Gemini, a cryptocurrency trading platform founded by the Winklevoss brothers, is one of Genesis’s largest creditors, with the firm reportedly owing $900 million to Gemini clients. On January 20, Gemini co-founder Cameron Winklevoss took to Twitter to to declare that the firm has been preparing to take direct legal action against DCG, Silbert and “others who share responsibility for the fraud.”

It seems that it is not clear if Gemini is part of the lawsuit filed by SGT. The law firm did not immediately respond to Cointelegraph’s request for comment.

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

Keep reading:

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  • Genesis reportedly planning to file for bankruptcy
  • DCG boss Barry Silbert writes letter to shareholders, community reacts
  • Digital Currency Group crisis likely won’t ’cause a lot of selling’, says Mike Novogratz
  • Will Grayscale be the next FTX?
  • British authorities are divided on the ban on the sale of investment products in cryptocurrencies
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