Editor’s note: the story has been updated with a statement by the Digital Currency Group.
Digital Currency Group (DCG) has initiated legal action against its bankrupt subsidiary, Genesis Global Capital LLC, seeking repayment related to a $1.1 billion support package issued during the crypto market crash of 2022.
The lawsuit, filed Thursday in the U.S. Bankruptcy Court for the Southern District of New York, claims the funds were provided to offset the financial damage caused by the collapse of Three Arrows Capital (3AC), The Block reported on Friday.
Genesis, a major lender to 3AC, suffered a $2.36 billion default after the hedge fund failed to meet a margin call in 2022.
DCG alleges the shortfall impacted the equity of Genesis Asia Pacific, prompting DCG to step in with the promissory note.
According to court filings, the note's principal was to be reduced in line with any recoveries from 3AC's collateral.
DCG now contends that Genesis recorded gains on that collateral exceeding the original $1.1 billion note, yet still owes DCG more than $105 million plus interest.
A spokesperson told Benzinga that “DCG took extraordinary efforts to voluntarily support Genesis in 2022, including by issuing a promissory note to Genesis to help close a potential book equity gap resulting from the collapse of Three Arrows Capital.”
They further stressed that DCG had “consistently met contractual obligations under that note and is asking the court to “confirm that the valid and binding obligation was fully satisfied.”
This case is the latest turn in an ongoing legal battle between the two entities.
Earlier this year, Genesis's Litigation Oversight Committee filed separate lawsuits against DCG, its CEO Barry Silbert, and other executives, alleging improper fund transfers during the 2022 market turmoil.
Genesis, which froze lending after the collapse of TerraUSD (CRYPTO: LUNC) and later FTX, filed for bankruptcy in 2023.
The firm completed a restructuring in 2024 and is currently distributing around $4 billion in assets to creditors.
Recovery rates vary depending on the cryptocurrency, while DCG, as an equity holder, is last in line for repayment.
Genesis has also sued its former parent for $2.1 billion to cover additional customer repayments.
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