Troubled cryptocurrency firm Digital Currency Group (DCG) faces further legal trouble as its subsidiary Genesis Capital was 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 federal securities laws.
the lawsuit was archived by the Connecticut-based law firm Silver Golub & Teitell (SGT) on behalf of the individuals and entities that entered into digital asset lending 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 lawsuit against DCG and Silbert alleges that Genesis engaged in an unregistered offering of securities in violation of securities laws by executing loan agreements involving securities that did not qualify for an exemption from registration under the federal securities laws.
The lawsuit also alleges that Genesis engaged in securities fraud through a scheme to defraud existing and potential digital asset lenders by making false and misleading statements. According to the plaintiffs, Genesis intentionally misrepresented the financial condition of Genesis, in violation of section 10(b) of the United States Securities Exchange Act.
“The scheme to defraud was carried out, according to the complaint, to induce potential digital asset lenders to lend digital assets to Genesis Global Capital and to prevent existing lenders from redeeming their digital assets,” SGT’s lawyers noted.
Founded in 2015, DCG is a Connecticut-based crypto company that serves as the parent company of multiple digital assets and blockchain-focused subsidiaries, including Genesis, digital asset manager Grayscale Investments, crypto mining firm Foundry, and news outlet of Coindesk cryptography. DCG’s current CEO, Silbert, holds a 40% controlling stake in the company and also serves as Chairman of the Board of Directors.
The news comes amid Genesis’s first bankruptcy hearings on Jan. 23 after the company filed for bankruptcy on Jan. 19. cryptocurrency bear market.
Related: Genesis seeks quick resolution to creditor disputes and exit from bankruptcy in May
Gemini, a crypto trading platform founded by the Winklevoss brothers, is one of Genesis’s largest creditors, with the firm reportedly owing $900 million to Gemini clients. On January 20, Gemini co-founder Cameron Winklevoss took to Twitter to to declare that the firm has been preparing to take direct legal action against DCG, Silbert and “others who share responsibility for the fraud.”
It does not appear to be clear if Gemini is part of the lawsuit filed by SGT. The law firm did not immediately respond to Cointelegraph’s request for comment.
