GenesisLOC

The official page for the Genesis Litigation Oversight Committee.

[GenesisLOC @TheGenesisLOC]

“Silbert, Kraines, Murphy, and Moro knew Genesis was too highly concentrated with 3AC, and knew of the mismatch between the size of the loans made to 3AC and the value of 3AC’s collateral.  But under Moro’s DCG-driven leadership, massive loans were issued to 3AC despite these risks.  Approving these under-secured loans benefited DCG while imperiling Genesis with the risk of insufficient collateral in the event of 3AC’s default or liquidation” (¶ 104)
#Genesis #GenesisLOC #CryptoNews #Crypto #DCG

[GenesisLOC @TheGenesisLOC]

Summary – False Narrative, Real Losses

“Silbert and his cronies recklessly operated, exploited, and then bankrupted Genesis following a spectacular campaign of fraud and self-dealing. Silbert used Genesis to enrich himself and finance his broader cryptocurrency empire on off-market, unfair terms before overseeing its demise” (¶ 1)

[GenesisLOC @TheGenesisLOC]

“Defendants acted to conceal Genesis’s insolvency while Silbert rushed to insulate himself, his friends, and DCG from the inevitable fallout, in disregard of the fiduciary duties they owed to Genesis for the benefit of its residual claimants, including individual and institutional creditors” (¶ 5)

[GenesisLOC @TheGenesisLOC]

“In the wake of the 3AC collapse, through its officers and employees, DCG drafted, edited, approved, and disseminated numerous misrepresentations and omissions about Genesis’s financial state.  Those misrepresentations falsely indicated that, among other things: (1) Genesis was solvent when it was not; (2) Genesis was adequately capitalized when it actually was severely undercapitalized; (3) Genesis’s balance sheet was “strong” when an accurate Genesis balance sheet would have reflected a $1.1 billion loss to 3AC; (4) the Promissory Note was a current asset worth $1.1 billion when actually the Promissory Note was illiquid and its real value was worth a tiny fraction of that amount.” ((¶ 294)

[GenesisLOC @TheGenesisLOC]

Accounting Fraud

“Silbert, Kraines, and Murphy each aided and abetted Moro’s breaches of fiduciary duty to Genesis, including to act in the interest of Genesis and its creditors. Instead of acting in those interests, Moro knowingly failed to implement proper risk protocols, signed the commercially unreasonable Promissory Note, and knowingly permitted and participated in DCG’s campaign of lies directed at the public Genesis creditors” (¶ 277)

[GenesisLOC @TheGenesisLOC]

“Silbert, Kraines, and Murphy caused DCG to issue the Promissory Note to Genesis, which was designed and accounted for to conceal Genesis’s $1.1 billion unsecured exposure to 3AC." ((¶ 277)

[GenesisLOC @TheGenesisLOC]

“By Silbert’s design, the various Genesis businesses were intertwined. Lenders would deposit traditional currency or cryptocurrencies with GGC. GGC would either loan those assets directly to third parties or transfer them to GAP to loan to counterparties based in Asia, including 3AC.” (¶ 51)

#genesis #dcg #genesisLOC #cryptocurrency #news

[GenesisLOC @TheGenesisLOC]

Genesis as DCG’s Alter Ego – Not Just Close, They Were One and the Same

“DCG’s compliant pawn, Genesis’s former ‘CEO’ Moro, stood by and allowed DCG to pilfer Genesis—which is no surprise, since Genesis employees who disagreed with Silbert or refused to do DCG’s bidding were terminated and faced Silbert’s influential wrath in the industry.” (¶ 8)

[GenesisLOC @TheGenesisLOC]

“DCG was also concerned about losing control of the company, because “[i]n bankruptcy, Genesis creditors would take control of any DCG stock held by Genesis” (¶ 153)

#dcg #genesis #genesisLOC #cryptonews

[GenesisLOC @TheGenesisLOC]

Systemic Control Failures

“Genesis was severely undercapitalized, lacked reasonable risk management, and had no board of directors or independent management of its own” (¶ 1)

[GenesisLOC @TheGenesisLOC]

“As DCG itself admitted internally, Defendants adopted a lending program at Genesis that was “‘flying blind” in terms of risk management” (¶ 2)

[GenesisLOC @TheGenesisLOC]

“Needing to maintain the illusion that all was well, to protect DCG and his crypto empire, Silbert focused on “continu[ing] to perpetuate” the idea “that [G]enesis [wa]s the ‘blue chip’ in this mess. Silbert knew that was a lie. But as he intended, Genesis’s lenders relied on the June 15 Statement, which created a false impression that things at Genesis were business as usual. (¶ 134)

#genesisLOC #dcg #crypto #genesis

[GenesisLOC @TheGenesisLOC]

False Marketing Campaign

“DCG required Genesis employees to recite the Silbert lines to customers when answering questions about Genesis’s financial state in the wake of the 3AC collapse. These DCG-scripted falsehoods were designed to induce customers, counterparties, and lenders, including those of Gemini and Bitvavo, to keep their valuable crypto and fiat currencies on the Genesis platform and continue depositing more” (¶ 12)

[GenesisLOC @TheGenesisLOC]

“These DCG-scripted falsehoods were designed to induce customers, counterparties, and lenders, including those of Gemini and Bitvavo, to keep their valuable crypto and fiat currencies on the Genesis platform and continue depositing more” (¶ 12)

[GenesisLOC @TheGenesisLOC]

"Thus, in mid-August 2022, DCG stopped using its intermediary Genesis and completely took over the Bitvavo relationship, including negotiating loan terms and communicating about Genesis’s financial state" (¶ 185)

#genesis #dcg #crypto #genesisLOC

[GenesisLOC @TheGenesisLOC]

Breach of Fiduciary Duties

"Genesis did not have a separate, independent existence from DCG. This was no secret at DCG. Internal DCG communications exhaustively document DCG’s understanding that Genesis was DCG’s alter ego" (¶ 53)

[GenesisLOC @TheGenesisLOC]

“[DCG] devot[ed] substantial resources towards an analysis of a plaintiff’s ability to pierce the DCG corporate veil in the event of a hypothetical blow up at Genesis” (¶ 54)

[GenesisLOC @TheGenesisLOC]

“Silbert himself admitted that, while Genesis’s primary unsecured exposure was to borrowers engaging in the GBTC Trade, “th[o]se loans are all ring-fenced at Genesis Capital and no lenders have recourse against DCG. Doesn’t mean they wouldn’t come after us of course, but we are not legally on the hook” (¶ 72)

[GenesisLOC @TheGenesisLOC]

The unsealed Delaware Complaint alleges Silbert and other DCG executives breached their fiduciary duties to Genesis, ran a false marketing campaign, failed to implement systemic control, had knowledge of wrongdoing, and more. We will share key quotes from the complaint in the coming days.

[GenesisLOC @TheGenesisLOC]

Knowledge of Wrongdoing

“Kraines even admitted that a future plaintiff could argue that Genesis was DCG’s alter ego. He wrote to Moro and others to pose a “war-gaming exercise” addressing the arguments the plaintiff would make if Genesis went bankrupt, which closely track the allegations in this Verified Complaint” (¶ 53)