DCG Sues Genesis Over $1.1B Promissory Note Tied to Post-3AC Collapse Rescue
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Digital Currency Group (DCG) has taken legal action against its own subsidiary, Genesis Global Capital, seeking repayment of more than $105 million plus interest in connection with a controversial $1.1 billion promissory note.
Filed Thursday in the U.S. Bankruptcy Court for the Southern District of New York, the lawsuit centers on events following the 2022 implosion of crypto hedge fund Three Arrows Capital (3AC).
At the time, Genesis – one of 3AC’s largest creditors – faced a massive $2.36 billion default when the fund failed to meet a margin call. DCG claims it stepped in voluntarily to stabilize Genesis’s balance sheet by issuing the billion-dollar note, aiming to plug what it described as a “hole” in the equity of Genesis Asia Pacific.
The filing alleges that subsequent crypto market recovery and “TAC Collateral” gains more than offset the original deficit, with Genesis realizing profits well above the note’s face value.
DCG argues these gains, referred to as “TAC Recoveries,” should have reduced the note’s principal entirely. Instead, DCG now wants the court to enforce repayment, accusing Genesis of holding funds it no longer needs to cover the original shortfall.
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