The Digital Currency Group (DCG) is set to face fresh legal woes after Genesis Capital received a securities class action lawsuit. The case will take place in the United States District Court for the District of Connecticut.
Silver Golub & Teitell (SGT) hit DCG founder and chief executive Barry Silbert with the lawsuit, citing federal securities laws violations.
Individuals involved in digital asset lending agreements with Genesis filed the litigation. SGT famously handled a Coinbase class action lawsuit in March last year.
According to the complaint, Genesis offered unregistered securities. Lending agreements also involved securities not exempt from registration under federal securities laws.
It added that Genesis defrauded investors with a scheme involving existing and potential digital asset lenders with misleading statements.
Plaintiffs accused Genesis of misrepresenting its financial standing, which breached section 10(b) of the US Securities Exchange Act. Concluding, the complaint said that the scheme aimed to “induce prospective digital asset lenders to loan digital assets to Genesis Global Capital,”
This prevented current lenders from “redeeming their digital assets,” the lawyers alleged.
FTX – DCG Links
The news comes after Genesis filed for bankruptcy, sending ripples across the crypto industry. This comes just months after the shock collapse of crypto exchange platform FTX. Several executives face massive fraud charges in New York courts, including disgraced ex-CEO and founder Sam Bankman-Fried.
Genesis declared bankruptcy after halting withdrawals in mid-November, shortly after FTX. The former halted withdrawals and could not honour redemption requests for its Earn rewards programme.
Gemini co-founder Cameron Winklevoss slammed the firm on Twitter and threatened further litigation against DCG and others involved in the scandal.
