Troubled cryptocurrency company Digital Currency Group (DCG) is facing more legal trouble as its subsidiary Genesis Capital has been slapped with a new class action lawsuit.
A group of Genesis creditors filed a securities class action (SCA) lawsuit against DCG and its founder and CEO Barry Silbert, alleging violations of the federal securities laws.
The trial was archived by Connecticut-based law firm Silver Golub & Teitell (SGT) on behalf of individuals and entities that have entered into digital asset loan agreements with Genesis. The law firm is known for handling 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 an unregistered securities offering in violation of securities laws by executing loan agreements involving securities without qualifying for an exemption from registration under the federal securities laws.
The lawsuit also alleges that Genesis committed securities fraud through a scheme to defraud potential and existing digital asset lenders with false and misleading statements. According to plaintiffs, Genesis intentionally misrepresented Genesis’ financial condition, in violation of section 10(b) of the United States Securities Exchange Act.
“The scheme for fraud was carried out, according to the complaint, to encourage prospective digital asset lenders to lend digital assets to Genesis Global Capital and to prevent existing lenders from redeeming their digital assets,” SGT lawyers noted.
Founded in 2015, DCG is a Connecticut-based crypto company that serves as the parent company of multiple digital asset and blockchain-focused subsidiaries, including Genesis, digital manager Grayscale Investments, crypto mining firm Foundry, and crypto media Coindesk. DCG’s current CEO Silbert maintains a controlling 40% equity stake in the company and also serves as chairman of its board of directors.
The news comes amid Genesis going through its first bankruptcy hearings on January 23rd after the company filed for bankruptcy on January 19th. The bankruptcy filing came a few months after Genesis halted withdrawals on Nov. 16 because it became unable to honor redemption requests in the interim. the bear cryptocurrency market.
Related: Genesis is eyeing a quick resolution to creditor disputes and a bankruptcy exit in May
Gemini, a crypto trading platform founded by the Winklevoss brothers, is one of Genesis’ biggest creditors, and the company reportedly owes $900 million to Gemini’s customers. On January 20, Gemini co-founder Cameron Winklevoss took to Twitter to to declare that the company was preparing to take direct legal action against DCG, Silbert and “others who share responsibility for the fraud.”
It seems unclear if Gemini is part of the lawsuit filed by SGT. The law firm did not immediately respond to Cointelegraph’s request for comment.
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