Cryptocurrency Lender Genesis Sues Parent Company DCG for $620M Loans

News | September 7, 2023 By:

Bankrupt cryptocurrency lender Genesis Global Holdco has filed lawsuits against its parent company Digital Currency Group seeking to recover over $620 million in outstanding loans. Genesis filed the lawsuits in a New York bankruptcy court on Wednesday, however, acknowledged that settlement discussions between the two companies are still ongoing.

The legal action comes after Genesis unveiled a debt repayment plan last month that was backed by some customers but not all creditors. The plan could allow unsecured creditors to potentially recover up to 90% of the amounts owed. However, support from key holdouts like Gemini Trust is still needed before the proposal can move forward.

The lawsuits specifically concern loans Genesis provided to DCG and its subsidiary DCG International Investments. This includes a $500 million loan to DCG and over 4,550 bitcoin loaned to the subsidiary. Genesis is seeking repayment of the outstanding debts as well as accrued interest and late fees.

Despite the legal filings, DCG stated they have agreed to a temporary halt on taking action over the loans to allow documentation of a “deal in principle” reached during court-mandated mediation with Genesis and creditors. DCG said they will start repaying the loans once a standstill agreement is submitted to the bankruptcy court.

The bankruptcy and outstanding debts stem from Genesis suspending customer withdrawals in November after the FTX collapse rattled confidence in the crypto market. The legal maneuvers now aim to resolve intercompany claims between Genesis and parent DCG to facilitate the lender’s restructuring process as it works to repay creditors impacted by its financial difficulties.