Digital Currency Group Sues Subsidiaries Over $1.1 Billion Promissory Note

Digital Currency Group (DCG), the parent company of several major crypto entities, has initiated legal proceedings against two of its subsidiaries, Genesis Global Capital and Genesis Asia Pacific. 

The case revolves around a $1.1 billion promissory note issued in 2022 following the collapse of Three Arrows Capital (3AC). DCG claims the subsidiaries profited significantly from the situation and are now obligated to return overpayments. 

This lawsuit adds another chapter to the long-running disputes between DCG and Genesis over financial dealings in the aftermath of the crypto market’s turbulent years.

Background to the $1.1 Billion Promissory Note

The origins of the dispute trace back to June 2022, a period of turmoil for the crypto industry. The collapse of Three Arrows Capital created widespread uncertainty, with multiple lenders and investors exposed to potential losses. 

To safeguard its subsidiaries against possible shortfalls, DCG issued a 10-year promissory note worth $1.1 billion. 

This was intended to protect Genesis Asia Pacific from any equity gaps resulting from 3AC’s default, while Genesis Global Capital also received cover against liquidity risks.

However, DCG has argued that the feared financial damage never fully materialised. Instead, Genesis was able to recover much of the value of its loans by using collateral provided by 3AC. 

This collateral included shares of Grayscale’s Bitcoin Trust, which increased in value as cryptocurrency markets eventually recovered. 

DCG’s filing alleges that Genesis not only avoided losses but ended up profiting by nearly $2.8 billion on loans originally worth $2.36 billion.

From DCG’s perspective, the promissory note had been designed as a shield but became an unnecessary windfall for its subsidiaries. 

The company now argues that Genesis owes repayment of over $105 million plus interest, reflecting overpayments that stemmed from the note’s provisions. 

For DCG, this is not just a technical accounting matter but a significant claim rooted in fairness and financial responsibility.

The filing was made in the U.S. Bankruptcy Court for the Southern District of New York, underlining the high-profile nature of the dispute. 

The case highlights how internal relationships within the DCG group, once seen as a sign of cohesion, have become increasingly fraught in the wake of the market’s downturn.

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Legal Battles Between DCG and Genesis

This lawsuit is not the first time DCG and Genesis have clashed in court. In May 2025, Genesis filed lawsuits against DCG, its affiliates, and CEO Barry Silbert. 

Those claims centred on allegations of fraud, insider enrichment, and concealed transfers amounting to $3.3 billion. Genesis alleged that DCG withdrew funds prior to its bankruptcy, worsening the financial strain on the subsidiaries.

In response to DCG’s current complaint, Genesis’ legal counsel, Luke Barefoot of Cleary Gottlieb, dismissed the claims as meritless. 

He argued that the promissory note was consistent with written agreements and past court representations, pointing out that DCG had already handed over more than $100 million in distributions. 

According to Barefoot, DCG’s decision to challenge the payments represented a “convenient about-face” and contradicted its previous actions.

The collapse of 3AC was just one event in a series of crises that shook the crypto market in 2022. The downfall of FTX later that year amplified industry-wide losses, triggering bankruptcies across lending platforms and exchanges. Genesis Global Capital was not immune to these pressures. 

Although its direct exposure to FTX was limited, the wider fallout caused what it described as a “run on the bank,” ultimately leading to its bankruptcy filing in January 2023.

After a lengthy restructuring process, Genesis completed its plan in August 2024, disbursing approximately $4 billion to affected parties. 

Despite this resolution, disputes with DCG have persisted, reflecting deep divisions over responsibility and financial management during the most volatile period in the industry’s history. 

The current case over the $1.1 billion promissory note has therefore become another front in an ongoing struggle between parent and subsidiary.

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The Wider Context of DCG’s Legal and Financial Struggles

The conflict between DCG and Genesis cannot be viewed in isolation. It reflects broader challenges faced by the cryptocurrency sector during and after the 2022 crash. 

The succession of failures, beginning with Terra and extending to 3AC, Celsius, Voyager, and FTX, revealed vulnerabilities in lending practices and the reliance on interconnected borrowing arrangements.

For DCG, a company with wide-reaching influence across crypto, the collapse of 3AC represented a test of its resilience. The decision to issue a $1.1 billion promissory note illustrated its attempt to shore up confidence in its subsidiaries. 

Yet, as the markets stabilised and asset values recovered, the purpose of the note became contested. DCG now claims that what was meant as protection turned into unjustified profit for Genesis.

The case also underscores the complicated relationship between parent companies and subsidiaries in the crypto sector. 

While DCG and Genesis once operated in close alignment, the stress of financial crises exposed fault lines. Litigation has become the means by which these disputes are being resolved, with billions of dollars at stake.

From a broader industry perspective, the lawsuit highlights the importance of transparency and governance. Investors and regulators have long criticised crypto firms for opaque practices, and cases like this reinforce calls for clearer accounting and accountability. 

With Genesis having already accused DCG of concealed transfers and insider enrichment, the new complaint deepens questions about how funds were managed during times of crisis.

At the same time, the filing connects the collapse of 3AC to wider events, such as the bankruptcy of FTX. 

Even without the 3AC default, DCG acknowledged that Genesis may not have had the capital strength to withstand the market-wide downturn caused by FTX’s collapse in November 2022. 

This reflects how interconnected the crises were, with each failure compounding the effects of the previous one.

Looking ahead, the outcome of DCG’s lawsuit may set precedents for how promissory notes and intra-company financial arrangements are treated in the crypto sector. 

It could influence how companies structure safeguards during times of market stress, as well as how courts assess disputes when conditions change and profits replace losses.

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Conclusion

Digital Currency Group’s lawsuit against its subsidiaries over the $1.1 billion promissory note shows how the aftermath of the 2022 crash continues to shape legal and financial disputes in crypto. 

With DCG claiming overpayments and Genesis dismissing the case as unfounded, the conflict highlights questions of governance, fairness, and accountability. 

Whatever the outcome, the case demonstrates the need for clearer structures in a volatile industry. 

For investors seeking stability while trading cryptocurrencies, platforms such as Bitrue provide a safer and more efficient way to navigate opportunities without the risks seen in corporate legal battles.

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FAQ

What is the basis of DCG’s lawsuit against Genesis?

DCG claims its subsidiaries profited unfairly from a $1.1 billion promissory note issued after the collapse of Three Arrows Capital.

How much does DCG say it is owed?

DCG is seeking more than $105 million plus interest, alleging overpayments from the note’s provisions.

What was Genesis’ response to the lawsuit?

Genesis’ legal team dismissed the claims as meritless, arguing they contradict past agreements and distributions already made.

How does the FTX collapse relate to this case?

Genesis said the FTX bankruptcy caused widespread panic and a “run on the bank,” leading to its own bankruptcy, even without 3AC’s default.

What happened after Genesis’ bankruptcy?

Genesis completed its restructuring in August 2024, disbursing around $4 billion to creditors, though disputes with DCG continue.

Investor Caution 

While the crypto hype has been exciting, remember that the crypto space can be volatile. Always conduct your research, assess your risk tolerance, and consider the long-term potential of any investment.

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