Digital Currency Group sued its own subsidiary Genesis, claiming that the loan of $ 1.1 billion was fully repaid due to the increase in Bitcoin’s value. This is another chapter of the drama that shakes the cryptocurrency industry.
A lawsuit of a mother’s company against a daughter company
Last Thursday, Digital Currency Group (DCG) filed a lawsuit against its former subsidiary Genesis, which went bankrupt in 2023. DCG claims that the loan of $ 1.1 billion granted Genesis in 2022 was more than sufficient to cover the losses resulting from the fall of the lender of cryptocurrencies.
Paradoxically, according to DCG, Genesis not only did not suffer losses, but actually made profits in a long -term perspective. This is a surprising claim in the context of one of the largest bankruptcies in the history of the crypto industry.
Three Arrows Capital, i.e. the source of the problem and its solution
History dates back to 2022, when Genesis granted loans to the fallen Krypto Three Arrows Capital company and other entities during the bear market on the digital assets market. The fall of Three Arrows Capital caused the domino effect, which eventually led to Genesis bankruptcy.
The key argument of DCG is the fact that the security recovered from the Three Arrows Capital was in Bitcoin and Actions Graysale Bitcoin Trust. Due to the significant increase in the value of cryptocurrencies from the moment of submitting the bankruptcy application, the recovered funds exceed the value of creditors’ claims on the date of submission of the application.
Genesis – a story from giant to bankrupt
Genesis was one of the largest lenders of cryptocurrencies, enabling users to earn on their cryptoctives by renting them to other entities. The company granted billion loans to problematic companies, including Three Arrows Capital and associated with FTX Alameda Research.
The breakthrough moment occurred with the collapse of the FTX stock exchange, when Genesis announced to customers that it suspends payments from his loan shoulder due to “unprecedented turmoil on the market.”
War of lawsuits: 3.1 billion vs 1.1 billion
Thursday’s DCG lawsuit is a response to the May Actions of Genesis, which sued DCG by $ 3.1 billion, accusing the company of Mother and CEO of Barry Silbert making fraudulent transfers on behalf of the lender during his fall.
DCG defends itself, arguing that “made extraordinary efforts to voluntarily support Genesis in 2022, including by issuing a promissory note to Genesis in order to help in closing the potential gap in the accounting capital” resulting from the fall of Three Arrows Capital.
Bitcoin as a hero or antihero?
The irony of fate is Bitcoin – often criticized for volatility – may be the key to solving this legal maze. The increase in BTC value since 2022 meant that the assets recovered from Three Arrows Capital significantly increased their value, which according to DCG means full repayment of liabilities.
What next in the fight of companies?
This legal battle is more than a family dispute in the cryptocurrency industry. This is a precedent that can affect future relations between mothers and their crypt subsidiaries. The result of the case may also set new standards for the valuation of cryptocurrency assets in bankruptcy proceedings.
For the crypto industry, which still rebuilds trust after the turmoil of 2022, this case is a test of how effectively the legal system can deal with modern financial instruments in the era of another digital revolution.
The rate is high. $ 1.1 billion is not only a balance number, but a symbol of how a cryptocurrency revolution has to face traditional financial law.
