Update (Aug. 15, 2025): This article has been updated with a statement from Genesis’ legal counsel.
Digital Currency Group (DCG), a prominent venture capital firm in the crypto and blockchain space, has initiated legal action against two of its subsidiaries regarding a $1.1 billion promissory note. This legal dispute centers around financial arrangements linked to the 2022 default of Three Arrows Capital (3AC).
On August 15, 2025, DCG filed a complaint in the US Bankruptcy Court for the Southern District of New York. The lawsuit alleges that Genesis Global Capital and Genesis Asia Pacific, subsidiaries under DCG, owe their parent firm payments based on recoveries received from 3AC.
The complaint highlights that DCG issued a 10-year promissory note to the Genesis entities in June 2022. This note was intended to shield Genesis Asia Pacific’s equity from potential shortfalls caused by 3AC’s collapse. However, DCG asserts that instead of suffering losses, Genesis gained substantial profits and should refund payments received under the note.
This lawsuit adds to a series of legal disputes following the 3AC collapse. Earlier, Genesis filed lawsuits against DCG and key executives, including CEO Barry Silbert, citing allegations of fraud and concealed fund transfers. They claimed over $3.3 billion related to pre-bankruptcy withdrawals by DCG.
In response, Genesis’ counsel, Luke Barefoot of Cleary Gottlieb, stated that DCG’s claims lack merit and contradict existing agreements and prior court representations, including the distribution of over $100 million from 3AC recoveries to DCG.
The promissory note was a precautionary measure to manage a potential equity gap due to the 3AC default. However, DCG contends that rising cryptocurrency prices and collateral appreciation, particularly of Grayscale’s Bitcoin Trust shares, allowed Genesis to recover significantly more than initially expected.
According to court filings, Genesis realized nearly $2.8 billion in recoveries on the original $2.36 billion in loans to 3AC, surpassing the collateral shortfall estimated at $1.1 billion when the note was issued.
Impact of the 2022 Crypto Market Crash
The collapse of 3AC triggered widespread turmoil across the crypto market, contributing to multiple bankruptcies and losses among investors. The filing also discusses the broader fallout from the November 2022 bankruptcy of major crypto exchange FTX, which further destabilized the market and precipitated a “run on the bank” scenario for Genesis.
Despite limited direct credit exposure to FTX, Genesis Global Capital ultimately filed for bankruptcy in January 2023 due to liquidity pressures prompted by the market crash and withdrawal freezes.
Alongside Genesis, other crypto lenders like BlockFi also filed for Chapter 11 bankruptcy amid this severe market distress.
After its bankruptcy filing, Genesis completed a restructuring plan in August 2024, arranging to distribute approximately $4 billion to affected creditors and stakeholders. DCG is now seeking a court order compelling Genesis to repay over $105 million plus interest as part of the ongoing dispute.
This saga reflects the complex and interconnected nature of the crypto industry’s legal and financial challenges following the 2022 market turmoil.