Digital Currency Group Faces Allegations of Unsettled Debts with Genesis

According to a court filing dated January 8, an ad hoc group of lenders affiliated with the insolvent Genesis claimed that Digital Currency Group (DCG) had not repaid the defunct lender its loan obligations in full, owing significant amounts in both Bitcoin and US Dollars.

DCG announced publicly on January 5 that it had repaid creditors over $1 billion within a year, including $700 million designated to Genesis to satisfy immediate obligations.

Contrary to the assertions made by the crypto asset management firm, the ad hoc group maintained that “DCG entities have failed to fulfill their responsibilities…and still owe substantial amounts of USD and BTC to the debtors’ estates and their creditors.”

According to the Genesis financiers’ group, DCG allegedly fulfilled its Bitcoin obligations by transferring a mere $189 million in cash and relinquishing portions of its holdings in the illiquid Grayscale Ethereum Classic Trust (ETCG) and Grayscale Ethereum Trust (ETHE).

However, the group noted, citing the partial repayment agreement between the two companies, that DCG is limited to paying its obligations in USD and BTC exclusively in these currencies, with no regard to other assets.

DCG’s outstanding BTC obligations are thus uncertain until Genesis liquidates ETCG and ETHE shares to acquire BTC.

Additionally, the loan agreements between the two parties stipulate that DCG entities are liable for an additional $26 million in interest and late penalties on the USD portion of the loans, as noted by the lenders. The ad hoc group wrote:

“The DCG Entities remain obligated to the Debtors for in excess of $26,000,000.00 for interest and late fees owed on account of the USD Portion of DCG’s obligations pursuant to the respective master loan agreements giving rise to such obligations,”

Genesis commenced legal proceedings against its parent company in September to recover a loan balance exceeding $700 million, comprised of both cash and cryptocurrencies, which was due for repayment by May 2023.

Additionally, the court documents disclosed that DCG had outstanding debts to Genesis and several other creditors exceeding $1.7 billion.