• Genesis creditors have launched a class action lawsuit against Digital Currency Group (DCG) and its CEO Barry Silbert for alleged violations of federal securities laws.
• The lawsuit alleges that Genesis violated the Securities Act by executing lending agreements involving securities without qualifying for an exemption from registration under the securities laws.
• The lawsuit also alleges that Genesis committed securities fraud by making false and misleading statements about its financial condition.
Creditors of Genesis, a digital asset lending platform that filed for bankruptcy last week, have launched a class action lawsuit against its parent company Digital Currency Group (DCG) and its CEO Barry Silbert for alleged violations of federal securities laws. The lawsuit was filed in the U.S. District Court for the District of Connecticut by creditors who loaned their digital assets to Genesis between February 2, 2021 and November 16, 2022.
The lawsuit alleges that Genesis violated the Securities Act by executing lending agreements involving securities without qualifying for an exemption from registration under the securities laws. The complaint further alleges that Genesis committed securities fraud by making false and misleading statements about its financial condition.
The class action seeks to hold DCG and Silbert liable as “Control Person(s)” in accordance with federal securities laws. The lawsuit alleges that the defendants were aware or should have been aware of the violations of the Securities Act and profited from them.
The lawsuit was filed by law firm Silver Golub & Teitell LLP which is representing Genesis creditors in the lawsuit. The firm noted that 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 creditors from understanding the true financial condition of Genesis Global Capital.”
The lawsuit seeks compensatory damages and equitable relief for the victims of the alleged fraud. According to the complaint, Genesis had deceived its creditors and investors by making false and misleading statements about its financial condition and prospects. As a result, creditors and investors have suffered significant losses due to their reliance on the false representations.
The lawsuit also seeks to enjoin DCG and Silbert from further violations of the Securities Act and to impose civil penalties. It remains to be seen how the case will progress but the lawsuit is likely to have a significant impact on the digital asset industry as a whole.