- A new lawsuit against Genesis reveals its parent company DCG orchestrated a deliberate scheme to mislead creditors.
- The lawsuit also accuses DCG of ignoring repeated warnings from risk consultants and auditors.
- The filing describes Genesis as a toxic work environment with a “culture of submission.”
- Genesis is seeking to recover over $3.3 billion from DCG, Silbert, and other executives.
A new lawsuit against Genesis Global Capital reveals that its parent company Digital Currency Group (DCG) orchestrated a deliberate scheme to mislead creditors and siphon funds from Genesis.
The complaint, filed in Delaware’s Court of Chancery, includes internal memos and emails suggesting DCG’s executives were fully aware of financial mismanagement and legal risks associated with their control over Genesis.
DCG is a major player in the crypto sector, known for owning and investing in several digital asset firms, including CoinDesk and Grayscale.
Central to the lawsuit is a 2022 internal memo from DCG’s Chief Financial Officer Michael Kraines, in which he warns then-CEO Michael Moro that Genesis might be considered DCG’s ‘alter ego’. Kraines described a ‘war…” exercise to anticipate the legal fallout if Genesis failed, foreshadowing the claims Genesis now faces.
Ignored Warnings and Risk Oversight Failures
The lawsuit also accuses DCG of ignoring repeated warnings from third-party risk consultants and internal auditors.
Despite rapid growth in Genesis’s loan book, from $4 billion to $12 billion, internal documents show DCG acknowledged the lender was ‘flying blind’ with weak financial controls.
Additionally, case documents show that auditors flagged material weaknesses as early as 2020. DCG approved the formation of a ‘contagion’ risk committee; its first meeting reportedly took place nine months later.
Kraines himself joked that the delay ‘just made my future deposition a bit easier’.
Toxic Culture and Public Misrepresentation
The filing describes a toxic work environment at Genesis, where employees were expected to prioritise DCG’s interests over sound governance. Genesis staff internally referred to the firm’s environment as a ‘culture of submission’.
One internal message alleged DCG kept Genesis afloat ‘to pillage the balance sheet’, propping up the lender to create a false sense of stability before extracting cash.
Staff were also instructed to stick to scripted public statements after the collapse of hedge fund Three Arrows Capital (3AC), while DCG executives, including CEO Barry Silbert, downplayed the crisis on social media.
‘These are not merely technical disputes over intercompany accounting,’ said the Genesis Litigation Oversight Committee. ‘The Delaware Complaint exposes a deliberate scheme by DCG and Barry Silbert to pillage Genesis as it collapsed.’
Controversial Transactions Under Scrutiny
The lawsuit spotlights two transactions in particular: a promissory note dated June 30, 2022, and a September 2022 ‘roundtrip’ deal. Both were allegedly designed to obscure Genesis’s insolvency and mislead creditors about its financial health.
Genesis is seeking to recover over $3.3 billion from DCG, Silbert, and other executives.
DCG has not issued a public response.
