A new class action lawsuit has been filed against the cryptocurrency corporation Digital Currency Group (DCG), making the company's legal woes even more numerous. The claim was filed against DCG's subsidiary Genesis Capital.
In a securities class action (SCA) lawsuit against DCG and its founder and CEO Barry Silbert, creditors of Genesis allege that the defendants violated laws governing the sale and purchase of securities in the United States.
On behalf of people and companies who engaged into digital asset loan arrangements with Genesis, the legal firm Silver Golub & Teitell (SGT) of Connecticut filed the action. The plaintiffs in the case are seeking compensation for their losses.
The legal company is well-known in the sector for managing important litigation, such as the class action complaint that was brought against Coinbase in March 2022.
In the new complaint filed against DCG and Silbert, it is alleged that Genesis engaged in an unregistered securities offering in violation of securities laws. Specifically, it is alleged that Genesis violated securities laws by executing lending agreements involving securities without first meeting the requirements for an exemption from registration under federal securities laws.
The complaint also claims that Genesis engaged in securities fraud by devising a plan to deceive new and current digital asset lenders by providing false and misleading representations. This is said to have occurred as part of a strategy to steal money.
Plaintiffs allege that Genesis knowingly misrepresented the company's current financial situation, which constitutes a violation of section 10(b) of the Securities Exchange Act of the United States. " The scheme to defraud was carried out, according to the complaint, in order to induce prospective digital asset lenders to loan digital assets to Genesis Global Capital and to prevent existing lenders from redeeming their digital assets," SGT lawyers noted. " The goal of the scheme was to induce prospective digital asset lenders to loan digital assets to Genesis Global Capital."
DCG is a cryptocurrency company based in Connecticut that was established in 2015. It functions as the parent company of several digital asset and blockchain-focused subsidiaries, some of which include Genesis, a digital asset manager called Grayscale Investments, a cryptocurrency mining company called Foundry, and a cryptocurrency media outlet called Coindesk.
Silbert, the current CEO of DCG, has a controlling ownership share in the company equal to forty percent and also serves as the chairman of the board of directors for DCG.
The announcement was made as Genesis was in the midst of its first bankruptcy proceedings on January 23, after the company's first bankruptcy filing on January 19.
The bankruptcy petition was filed a few months after Genesis temporarily ceased withdrawals on November 16 due to the fact that the company had been unable to execute redemption requests in light of the bear market in cryptocurrencies.
It has been revealed that Genesis owes $900 million to the customers of the cryptocurrency trading platform Gemini, which was established by the Winklevoss brothers. Gemini is one of the most significant debtors of Genesis.
Cameron Winklevoss, one of the co-founders of Gemini, went to Twitter on January 20 to announce that the company was ready to take direct legal action against DCG, Silbert, and "those who share culpability for the scam."