Digital Currency Group (DCG) and CEO Barry Silbert are facing a securities class action (SCA) lawsuit from a group of Genesis creditors.
DCG and Barry Silbert faced with securities lawsuit
The lawsuit was filed by Silver Golub & Teitell (SGT), a law firm based in Connecticut, on behalf of those who entered into lending agreements involving digital assets with Genesis.
SGT is known for taking on major crypto industry lawsuits, such as the class action lawsuit filed against the popular digital asset exchange Coinbase back in March 2022.
The lawsuit against DCG and Silbert claims that Genesis broke securities laws by carrying out lending agreements involving securities without being exempt from registration as per federal securities laws and thus conducting an unregistered securities offering.
Furthermore, the lawsuit asserts that Genesis engaged in fraudulent securities activities by providing false or misleading information about the company’s financial status.
“The scheme to defraud was carried out, according to the complaint, in order to induce prospective digital asset lenders to loan digital assets to Genesis Global Capital and to prevent existing lenders from redeeming their digital assets.”Statement by Silver Golub & Teitell
Genesis bankruptcy proceedings
The recent news surfaced as Genesis, a subsidiary of DCG, is undergoing its first bankruptcy proceedings following the filing of chapter 11 bankruptcy on Jan. 19th. The company collected $5.1 billion in liabilities before pausing withdrawals on its lending platforms due to its exposure to the FTX catastrophe.
New hope for a settlement with creditors by the end of the week has emerged for Genesis, as the company’s attorney, Sean O’Neal, expressed during an initial hearing at the U.S. Bankruptcy Court for the NY Southern District on Jan. 23.
Furthermore, O’Neal suggested that the company may exit bankruptcy within four months. He also stated that Genesis has “some degree of confidence” that it will reach an agreement with creditors by the end of the week, and if necessary, it will request the court to appoint a mediator.