A new class action complaint was filed against Digital Currency Group (DCG), a troubled cryptocurrency company, on behalf of its subsidiary Genesis Capital.
Genesis creditors accused DCG and its CEO Barry Silbert of breaking the law when they launched a securities class action (SCA) case against DCG.
Silver Golub & Teitell (SGT), a law firm with offices in Connecticut, brought the complaint on behalf of people and organizations that signed financing contracts with Genesis for digital assets. The law firm has a reputation for managing significant industry cases, including one brought in March 2022 against Coinbase as part of a class action.
Genesis executed lending agreements involving securities without being eligible for an exemption from registration under the federal securities laws, according to the new complaint against DCG and Silbert. This allegedly constituted unregistered securities offering in violation of the securities laws.
Genesis fraud plan
According to the lawsuit Genesis is accused of engaging in a plan to defraud both potential and current lenders of digital assets by making false and misleading assertions. Plaintiffs contend that Genesis intentionally misrepresented Genesis’ financial situation, in violation of section 10(b) of the US Securities Exchange Act.
According to the lawsuit, the fraud plan was carried out in order to persuade potential digital asset lenders to lend their assets to Genesis Global Capital and to stop current lenders from redeeming their digital assets.
Genesis, digital asset management Grayscale Investments, crypto mining company Foundry, and crypto media site Coindesk are just a few of the digital asset and blockchain-focused subsidiaries of DCG, a Connecticut-based cryptocurrency company that was founded in 2015. The current CEO of DCG, Silbert, also holds a controlling 40% stock position in the company and is the board of directors chairman.
The announcement coincides with Genesis’ initial bankruptcy proceedings, which were held on January 23 after the company filed for bankruptcy on January 19. The company filed for bankruptcy a few months after Genesis stopped accepting withdrawal requests on November 16 because it was unable to fulfill redemption requests due to the bear bitcoin market.