In the article “Season Of Reckoning: Bitcoin Author Exposes DCG Fraud Bigger Than FTX Embezzlement,” the aftermath of FTX’s collapse and the subsequent guilty verdict of its former CEO has sent shockwaves throughout the crypto industry. However, Bitcoin author Vijay Boyapati alleges that an even larger and more complex fraud took place in 2022, orchestrated by Digital Currency Group (DCG) and its CEO, Barry Gilbert. Boyapati’s detailed expose on social media platform X shines a light on how DCG and its affiliates misrepresented the solvency of cryptocurrency brokerage Genesis, ultimately leading to its bankruptcy. With the New York Attorney General filing a $1 billion civil complaint, this revelation could have far-reaching consequences, reminiscent of the FTX scandal that has garnered significant media attention.
Genesis Fraud Exposed: The Truth About Barry Silbert’s DCG Empire
Bitcoin author Vijay Boyapati recently brought attention to an alleged fraud committed by Digital Currency Group (DCG) and its CEO, Barry Silbert. Boyapati asserts that DCG and its affiliates deceived creditors by falsely representing the solvency of Genesis, a cryptocurrency brokerage, before it filed for bankruptcy in the wake of the FTX collapse.
According to Boyapati, Genesis had been insolvent since June 2022, following the collapse of the Terra Luna ecosystem. However, the company’s senior executives engaged in an elaborate scheme to hide these losses on Genesis’ balance sheet. The details of this alleged fraud have largely been overlooked by the mainstream media.
Why Go Through This Elaborate Scheme?
One might wonder why DCG went to such lengths to deceive creditors and maintain the facade of solvency for Genesis. The answer lies in a massive loan of 18,697 BTC that DCG had obtained from Genesis. If Genesis were to declare bankruptcy, DCG would be obligated to repay this loan. Therefore, by continuing the facade, DCG could avoid paying back the loan and keep its own finances intact.
Details of the Alleged Fraud
Boyapati outlines the alleged fraud committed by DCG and its affiliates. After the collapse of the Terra Luna ecosystem, which caused insolvency for cryptocurrency hedge fund Three Arrows Capital (3AC), Genesis found itself with a $1.2 billion deficiency on its balance sheet. Unable to pay back its own Bitcoin lenders, Genesis filed for bankruptcy.
At this point, DCG purportedly stepped in and assumed the entire $1.2 billion claim with a promissory note to clear Genesis of any outstanding liabilities to 3AC. However, Boyapati claims that this promissory note was a sham, designed to convince Genesis’ clients that the company was solvent.
Genesis Bankruptcy and Solvency
The insolvency of Genesis can be traced back to the collapse of the Terra Luna ecosystem, which left Three Arrows Capital insolvent and unable to repay its lenders, including Genesis. This resulted in a $1.2 billion deficiency on Genesis’ balance sheet, leading to the company’s bankruptcy filing.
Boyapati argues that Genesis had actually been insolvent since June 2022, months before it announced its bankruptcy. The company’s senior executives allegedly employed an elaborate scheme to hide these losses and maintain the illusion of solvency.
The Role of Three Arrows Capital
Three Arrows Capital played a significant role in the alleged fraud committed by DCG and Genesis. As one of the top Bitcoin lenders for Three Arrows Capital and lending platform BlockFi, Genesis facilitated profitable trading for these entities in the early days of the Grayscale Bitcoin Trust (GBTC). However, as the GBTC lost its premium over the net asset value of Bitcoin, Three Arrows Capital had to seek other profitable trading opportunities, including TerraUSD.
Unfortunately, the collapse of the Terra Luna ecosystem in May 2022 left Three Arrows Capital financially crippled, leading to insolvency. This, in turn, affected Genesis, as Three Arrows Capital was unable to repay its $2.3 billion loan from its lenders, including Genesis. The resulting deficiency on Genesis’ balance sheet ultimately contributed to the company’s bankruptcy.
DCG’s Incentives to Continue the Facade
DCG had a significant incentive to perpetuate the facade of Genesis’ solvency. With a massive loan of 18,697 BTC from Genesis, DCG would have been obligated to repay this loan if Genesis declared bankruptcy. By maintaining the illusion of solvency, DCG could avoid having to repay the loan, protecting its own financial interests.
The Promissory Note Sham
According to Boyapati, the promissory note that DCG used to assume the $1.2 billion claim against Genesis was nothing more than a sham. It was a plot to convince Genesis’ clients that the company was solvent, despite the underlying insolvency. This further highlights the alleged fraudulent actions of DCG and its affiliates.
New York Attorney General’s Lawsuit
The New York Attorney General has filed a $1 billion civil complaint against Genesis, DCG, and executives Barry Silbert and Michael Moro. This lawsuit brings the alleged fraud to the forefront and seeks to hold those involved accountable for their actions.
Comparisons to the FTX Scandal
Boyapati draws comparisons between the alleged fraud involving DCG and the recent FTX scandal. However, he highlights the lack of attention given to the Genesis case by the mainstream media. If the claims made by Boyapati are substantiated, it is possible that the civil complaint against DCG and Genesis could evolve into a criminal case.
Potential Criminal Case
Given the seriousness of the allegations and the involvement of high-profile individuals and organizations, the Genesis fraud case could potentially lead to a criminal investigation and prosecution. Should evidence corroborate the claims made by Boyapati and the New York Attorney General’s lawsuit, those responsible for the alleged fraud may face severe legal consequences.
In conclusion, the alleged fraud surrounding DCG and Genesis is a significant development in the crypto industry. If substantiated, it exposes the deceitful actions of a prominent company and its executives. The aftermath of this case will likely have far-reaching implications for the industry, shedding light on the importance of transparency, accountability, and ethical practices.