As Genesis goes through its first bankruptcy hearing, a group of creditors has slapped a new class action lawsuit on the firm.
Troubled cryptocurrency company Digital Currency Group (DCG) is facing more legal issues after its subsidiary Genesis Capital was slapped with a new class action lawsuit.
A group of Genesis lenders filed a securities class action (SCA) lawsuit against DCG and its founder and CEO, Barry Silbert, alleging violations of federal securities laws
Filed by Connecticut law firm Silver Golub & Teitel (SGT) on behalf of individuals and entities entering into digital asset loan agreements with Genesis, the law firm is best known for handling major industry lawsuits, including March 2022 against Coinbase including the class action lawsuit filed in .
The new complaint against DCG and Silbert alleges that Genesis engaged in unregistered securities offerings in violation of securities laws by executing securities-related credit agreements without qualifying for exemption from registration under federal securities laws.
The lawsuit also alleges that Genesys committed securities fraud through a scheme that defrauded lenders of potential existing digital assets by making false and misleading statements. According to the plaintiffs, Genesis violated Section 10(b) of the United States Securities Exchange Act by knowingly misrepresenting the financial condition of Genesis
The SGT attorney noted that the fraudulent scheme was designed to induce potential digital asset lenders to lend digital assets to Genesis Global Capital and prevent existing lenders from redeeming their digital assets, according to the complaint
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Founded in 2015, DCG is a Connecticut-based crypto firm that serves as the parent company of several digital assets and blockchain-focused subsidiaries, including Genesys, digital asset manager Grayscale Investments, crypto mining firm Foundry, Crypto Silbert, KY Current chief executives include DCG, which includes -media outlets and Coindesk, has a controlling 40% equity stake in the firm and also serves as chairman of its board of directors.
The news comes as Genesis filed for its first bankruptcy hearing on Jan. 23 after the firm filed for bankruptcy on Jan. 19. The bankruptcy filing came a few months after Genesis postponed withdrawal on Nov. 16 is because the bear cryptocurrency market could not honor the redemption requests.
RELATED: Genesis has seen early settlement of creditor disputes and emerged from bankruptcy in May
Gemini, the crypto trading platform founded by the Winklevoss brothers, is one of the largest creditors of Genesis, which reportedly owes $900 million to Gemini customers On January 20, Gemini co-founder Cameron Winklevoss announced on Twitter that DCG, Silbert, and “others who… share responsibility for the fraud”. It is ready to take direct legal action against them
It seems unclear whether Gemini plays a role in the lawsuit filed by Sgt. The law firm did not immediately respond to Cointelgraph’s request for comment.