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Trouble cryptocurrency company Digital Currency Group (DCG) is confronted with more legal issues than its subsidiary Genesis Capital has been struck by a new class action.
A group of historical creditors filed a class action (sca) against dcg and its founder and managing director Barry Silbert, alleging breaches of federal securities laws.
The lawsuit was filed by Connecticut-based law firm Silver Golub & Teitell (SGT) on behalf of individuals and entities who entered into digital asset lending agreements with Genesis. The law firm is known for handling major industry lawsuits, including a class action suit filed against Coinbase in March 2022.
The new complaint against DCG and Silbert alleges that Genesis engaged in an unregistered securities offering in violation of securities laws by executing lending agreements involving securities without qualifying for an exemption from registration under the federal securities laws.
The prosecution also alleges that Genesis committed securities fraud through a scheme to defraud lenders of potential and existing digital assets through misrepresentation. According to plaintiffs, Genesis intentionally misrepresented the financial condition of Genesis, violating section 10(b) of the United States’ Securities Exchange Act.
“The fraud scheme went ahead, complaint-driven, to encourage potential digital lenders to lend digital assets to Genesis Global Capital and prevent existing lenders from buying back their digital assets," noted SGT counsel.
Established in 2015, dcg is a Connecticut-based crypto company serving as the parent of multiple digital assets and blockchain-focused affiliates, including genesis, Grey Level Investments for Digital Asset Managers, the foundry of a crypto mining firm and the crypto media outlet. The present CEO of dcg, Silbert, retains a 40% majority stake in the company and is also chairman of its board of directors.
The news comes amid Genesis going through its first bankruptcy hearings on Jan. 23 after the firm filed for bankruptcy on Jan. 19. The bankruptcy filing came a few months after Genesis halted withdrawals on Nov. 16 as he became incapable of honoring the demands for redemption in the middle of the bear cryptocurrency market.
Related: Genesis eyes fast resolution to creditor disputes and bankruptcy exit in May
Gemini, a crypto trading platform founded by Winklevoss brothers, is one of the biggest creditors of Genesis, with the firm reportedly owing $900 million to Gemini’s clients. On Jan. 20, Gemini co-founder Cameron Winklevoss took to Twitter to declare that the firm has been preparing to take direct legal action against DCG, Silbert and “others who share responsibility for the fraud.”
It seems difficult to know if Gemini is a party to SGT's lawsuit. Cointelegraph's request for comment was not immediately received from the law firm.
