Digital Currency Group (DCG) has filed a request to dismiss the legal action brought against it by the New York Attorney General Letitia James, arguing that the lawsuit is based on “baseless innuendo” and mischaracterizations.
The lawsuit was filed last year and alleges that DCG, along with Gemini and Genesis, misled over 230,000 investors. DCG’s lawyers submitted a court document seeking to have the lawsuit thrown out, arguing that DCG followed guidance from financial experts and acted with integrity.
DCG’s founder Barry Silbert was named as a co-defendant in the lawsuit. The legal team claims that the case relies on unfounded accusations and portrays DCG’s support of its subsidiary as participation in fraud.
Specifically, DCG explains that it invested funds into Genesis following a liquidity crunch and that the promissory note was a binding obligation endorsed by advisers and the firm’s board of directors.
DCG’s defense particularly focuses on a promissory note, which it claims was “properly vetted” and “entirely valid,” contesting the NYAG’s framing of the financial instrument as part of the alleged fraud.
Despite settling with the NY Department of Financial Services (NYDFS), DCG and Silbert are now requesting the court to throw out the NYAG’s lawsuit, describing the accusations against them as “baseless innuendo, blatant mischaracterizations, and unsupported conclusory statements.”Top of Form
Separately, Digital Currency Group raised objections against the settlement reached between the New York Attorney General and Genesis.
The controversy centers around the settlement agreement designed to resolve allegations that Genesis defrauded investors. DCG’s contention is that the agreement unfairly reallocates value from lower-priority creditors to those with preferred status, thereby violating the principles of absolute priority under bankruptcy law.
DCG’s critique was formalized in an objection filed with the U.S. Bankruptcy Court for the Southern District of New York, which is tasked with approving the settlement. The parent company argues that the settlement represents an improper attempt to bypass U.S. bankruptcy statutes, describing it as a “subversive arrangement” crafted hastily and without transparency.
DCG’s contention centers around Genesis’s plan to offer its customers “additional payouts” that reflect the increased value of cryptocurrencies since January 2023, when Genesis filed for bankruptcy. DCG argues that such payouts exceed what customers and creditors are legally entitled to under U.S. bankruptcy law.
DCG insists that repayments should be based on the value of the crypto assets at the time of the bankruptcy filing, rather than their current, higher market prices. This stance is driven by concerns that Genesis’s approach could leave fewer assets available for DCG after customer repayments are made, given the rise in the value of assets like bitcoin since the filing.
