Key Takeaways
- According to the filing, 3AC had pledged assets such as Grayscale Bitcoin Trust shares as collateral for the loans
- Genesis points out that DCG has already transferred over $100 million under the terms of the note,
Leading Venture Capital firm Digital Currency Group (DCG) has filed a lawsuit against Genesis Global Capital, the crypto lender it owns, seeking repayment of more than USD 105 million linked to a USD 1.1 billion promissory note. The case, filed in the U.S. Bankruptcy Court for the Southern District of New York, revisits a financial arrangement created in the aftermath of the collapse of Three Arrows Capital (3AC) in 2022.
Genesis had extended loans totalling USD 2.36 billion to 3AC, making it one of the hedge fund’s largest creditors. When 3AC defaulted, Genesis absorbed heavy losses. In response, DCG issued a ten-year promissory note in June 2022 to provide relief and to strengthen Genesis Asia Pacific’s balance sheet. DCG now maintains that later recoveries from 3AC’s collateral have effectively erased the outstanding obligation.
According to the filing, 3AC had pledged assets such as Grayscale Bitcoin Trust shares as collateral for the loans. DCG, in its lawsuit, argues that as the market rebounded, these holdings delivered recoveries worth approximately $2.8 billion — a figure that surpassed the original loan value. On that basis, the company contends that the promissory note has been cancelled out in full.
The filing also highlights DCG’s efforts to backstop Genesis during the industry downturn. The firm asserts that while the promissory note was valid at inception, subsequent recoveries mean there is no further liability.
Genesis contests that view. Through its legal counsel at Cleary Gottlieb, the lender accused DCG of shifting its stance for strategic advantage and of attempting to withhold distributions that, in its view, are contractually due. Genesis points out that DCG has already transferred over $100 million under the terms of the note, which it argues supports its interpretation of the arrangement.
Earlier this year, Genesis also filed a separate case against DCG and its chief executive, Barry Silbert, alleging fraud and seeking USD 3.1 billion in damages. That complaint claimed DCG engaged in improper transfers ahead of Genesis’s bankruptcy proceedings.
