Troubled cryptocurrency company Digital Currency Group (DCG) is facing new legal challenges as its subsidiary Genesis Capital has received a new class action lawsuit.
A group of Genesis creditors has filed a securities class action lawsuit (SCA) against DCG and its founder and CEO, Barry Silbert, alleging violations of federal securities laws.
The lawsuit was filed by Connecticut-based law firm Silver Golub & Teitell (SGT) on behalf of individuals and entities that have entered into digital asset lending agreements with Genesis. The law firm is known for pursuing major industry lawsuits, including a class action lawsuit filed against Coinbase in March 2022.
The new complaint against DCG and Silbert alleges that Genesis engaged in unregistered securities placements in violation of securities laws by entering into loan agreements involving securities without the right to exemption from registration under federal securities laws.
The lawsuit also alleges that Genesis committed securities fraud with a scheme to defraud potential and existing creditors of digital assets by providing false and misleading statements. According to plaintiffs, Genesis intentionally misrepresented Genesis’ financial position in violation of section 10(b) of the US Securities and Exchange Act.
“According to the complaint, the fraud scheme was implemented to encourage potential digital asset lenders to loan digital assets to Genesis Global Capital and prevent existing lenders from buying back their digital assets,” lawyers for SGT noted.
Founded in 2015, DCG is a Connecticut-based crypto firm that serves as the parent company to several digital asset and blockchain-focused subsidiaries, including Genesis, digital asset management company Grayscale Investments, crypto mining firm Foundry, and crypto media Coindesk. . Current DCG CEO Silbert owns a 40% controlling interest in the firm and is also chairman of its board of directors.
The news comes amid the first Genesis bankruptcy hearing on Jan. 23, after the firm filed for bankruptcy on Jan. 19. The bankruptcy filing comes months after Genesis put its withdrawals on hold on Nov. 16 as it was unable to meet buyback requests amid a cryptocurrency bear market.
Related: Genesis Expects Quick Creditor Dispute Resolution and Exit Bankruptcy in May
Gemini, a cryptocurrency trading platform founded by the Winklevoss brothers, is one of Genesis’ biggest creditors, with the firm reportedly owing $900 million to Gemini customers. On January 20, Gemini co-founder Cameron Winklevoss tweeted that the firm is preparing to take direct legal action against DCG, Silbert, and “other individuals who are responsible for the fraud.”
It seems unclear if the Gemini are part of the lawsuit filed by SGT. The law firm did not immediately respond to ‘s request for comment.