DCG Takes Genesis to Court Over $105 Million Debt Dispute
The Digital Currency Group (DCG) has filed a lawsuit against its credit subsidiary Genesis, seeking to confirm a debt of over $105 million plus interest. This debt stems from a financial backstop provided during the crypto downturn in 2022. According to the complaint submitted to the US bankruptcy court for the southern district of New York, DCG issued a $1.1 billion promissory note to Genesis after the hedge fund Three Arrows Capital (3AC) defaulted on a margin call of $2.36 billion.
Background of the Dispute
The default by 3AC, one of Genesis’ largest borrowers, resulted in a significant deficit in Genesis’ Asia Pacific equity. In an effort to stabilize the business, DCG “voluntarily” injected capital through the promissory note. However, as the crypto markets recovered, Genesis benefited from the collateral, which appreciated far beyond the original value of the note. DCG argues that these profits have reduced the capital amount, eliminating $105 million in debt.
DCG stated that it “made extraordinary efforts” to keep Genesis alive in 2022 and is simply seeking court confirmation of the repayment status. This lawsuit adds another layer of tension to the already strained relationship between the two companies. Earlier this year, the Genesis creditor committee sued DCG, its CEO Barry Silbert, and other executives, alleging that billions of dollars were wrongly taken from the lender in 2022.
Genesis’ Bankruptcy and Restructuring
Genesis, one of several high-profile companies to collapse after the FTX bankruptcy, ceased lending at the end of 2022 and filed for Chapter 11 protection in early 2023. The subsequent restructuring resulted in the distribution of around $4 billion to creditors, with recovery amounts varying depending on the asset. As a stockholder, DCG is repaid last and has questioned parts of the bankruptcy plan.
For more information on this developing story, please visit the source link: https://cryptoslate.com/dcg-sues-genesis-over-promissory-note-debt-amid-bankruptcy-challenges/
