Bankrupt Genesis sues parent DCG over unpaid loans of more than $832 million
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Digital Currency Group was sued on Wednesday by its bankrupt Genesis Global Capital cryptocurrency lending unit.
PHOTO: REUTERS
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NEW YORK - Digital Currency Group (DCG) was sued on Wednesday by its bankrupt Genesis Global Capital cryptocurrency lending unit, as both sides negotiate DCG’s repayment on more than US$610 million (S$832 million) of loans that matured in May.
In a complaint filed in Manhattan bankruptcy court, Genesis is seeking to recoup US$500 million that DCG borrowed under four loans.
It also filed a separate complaint to recover 4,550 bitcoin, worth about US$117 million, owed by the affiliated Digital Currency Group International under a fifth loan.
Genesis said recovering the unpaid sums would offer a “significant benefit” to its bankruptcy estate, but that DCG is “wrongfully in possession”.
In footnotes, Genesis said it is in talks for “partial repayment” by DCG, and intends to stop pursuing the lawsuits if both sides settle.
According to court papers, DCG owes more than US$1.7 billion to Genesis and other debtors.
Genesis filed for Chapter 11 protection from creditors in January, two months after halting withdrawals. DCG, which also owns crypto news website CoinDesk and digital asset manager Grayscale, has not sought bankruptcy protection.
DCG raised US$700 million in November 2021 from prominent investors such as Singapore’s GIC, SoftBank, Ribbit Capital and Alphabet’s CapitalG.
Last Tuesday, Genesis said it reached an agreement in principle with DCG and unsecured creditors, where to satisfy those obligations DCG would pay US$275 million, and take out US$1.16 billion of new credit facilities maturing in two or seven years.
In a statement on Wednesday, DCG said it expects to file a settlement with the bankruptcy court soon.
“At that point, we will initiate the distribution of funds and continue on the path to significant recovery for Genesis creditors,” it said.
Genesis also made large loans to the hedge funds Three Arrows Capital and Alameda Research, which both filed for bankruptcy in 2022.
Alameda’s parent, cryptocurrency exchange FTX, also filed for Chapter 11. US prosecutors have accused FTX’s founder Sam Bankman-Fried of orchestrating a multibillion-dollar fraud. REUTERS
