Reported by Kevin T. Dugan

(Summary version featured below)

In the aftermath of the 2022 crypto market collapse, billionaire Barry Silbert, a prominent figure in the digital asset space, assured investors their money was safe. However, new court filings suggest a stark contrast between his public reassurances and private actions. According to creditors of Genesis Capital, Silbert demanded repayment of over $100 million in loans shortly after receiving a warning of an impending market crash. These actions, they allege, marked the beginning of a broader campaign of fraud and self-dealing that ultimately contributed to Genesis’s bankruptcy.

Silbert, through his firm Digital Currency Group (DCG), had established a major presence in the crypto industry with investments in ventures like Grayscale Investments and Genesis. The creditors claim that Silbert misrepresented the financial health of his companies while he and his associates withdrew millions, misleading investors and operating with insufficient oversight. A recent 202-page filing in Delaware Chancery Court accuses Silbert and his inner circle of recklessly exploiting Genesis for personal gain and contributing to its collapse.

The creditors argue that the problems began much earlier than commonly believed, citing 2021 as the starting point when the Grayscale Bitcoin Trust began trading at a discount to its underlying assets. This decline, they say, pushed Genesis toward insolvency. They also allege that DCG restricted Genesis from hedging or selling its Grayscale holdings, worsening the situation. During this time, Genesis continued to extend loans to hedge funds like Three Arrows Capital, even as those firms became increasingly vulnerable, culminating in significant exposure to the failed TerraUSD and Luna tokens.

When Three Arrows collapsed, Genesis faced a $1.1 billion shortfall. Rather than acknowledge the crisis, DCG allegedly pressured partners not to withdraw funds and produced a misleading $1.1 billion promissory note with help from investment bank Ducera Partners. Internal messages revealed Silbert was aware of the financial hole and was actively seeking ways to cover it. As lawsuits progress in both Delaware and federal courts, creditors are seeking $2.3 billion, aiming to recover in digital assets, while DCG continues to deny wrongdoing and promises to fight what it calls baseless claims.

Read full report: https://archive.ph/rJll7 OR https://www.wsj.com/finance/currencies/crypto-billionaire-accused-of-defrauding-creditors-propelling-industrys-2022-collapse-2cce4f22?mod=mhp