Allegations from Genesis: Funds Were Deliberately Transferred

According to the complaint made public by the Delaware Chancery Court on May 19, DCG allegedly treated Genesis like a “corporate ATM,” transferring millions of dollars for its own benefit.

In the filings prepared by Genesis’s Litigation Oversight Committee (LOC), it’s claimed that around $2.1 billion worth of digital assets were moved out of the company as it spiraled toward collapse. The remaining debt reportedly stands at approximately $2.2 billion, consisting of Bitcoin, Ethereum, and various other tokens.

Striking Details in the Lawsuit Documents

The documents also allege that $1.2 billion was withdrawn from Genesis before it filed for bankruptcy. Notably, these withdrawals occurred shortly after the collapses of Terra-Luna, 3AC, and FTX — raising concerns about timing and intent. Genesis claims that while insiders recovered all of their funds, retail and institutional investors suffered massive losses.

The lawsuit highlights that Genesis operated without an independent board, with major decisions shaped entirely to benefit DCG. Genesis was allegedly forced to accept illiquid GBTC shares as collateral and was barred from selling them, even after regulatory lockup periods ended — a move that created serious valuation risks for the company.

Who’s Being Accused?

In addition to Barry Silbert, the complaint names former Genesis CEO Michael Moro, former DCG CFO Michael Kraines, DCG President Mark Murphy, and investment advisor Ducera Partners as defendants.

A second lawsuit was filed in the U.S. Bankruptcy Court for the Southern District of New York, alleging that DCG and its affiliates withdrew $1.2 billion in cash and crypto during the 12 months leading up to Genesis’s bankruptcy.

A $3.3 Billion Claim for Compensation

Through these two lawsuits, Genesis is seeking to recover more than $3.3 billion. These legal actions underline how lack of transparency and poor governance can lead to devastating consequences in the crypto industry.

Meanwhile, in April 2025, a New York judge allowed most of another civil fraud case against DCG, Silbert, and former Genesis CEO Michael Moro to proceed. This case alleges that Genesis misled investors after the collapse of Three Arrows Capital, hiding a $1 billion hole with a 10-year, low-interest promissory note.

Genesis filed for bankruptcy in early 2023, with $14 billion in outstanding loans.

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Babylon’s Core Approach

Babylon operates using a “shared security” model, allowing different PoS networks to benefit from the security provided by Bitcoin. Bitcoin investors can stake their BTC without wrapping or bridging it to another network, in return for alternative coin rewards from PoS networks.

The protocol is built on the Cosmos SDK. This infrastructure allows the node structure to be segmented into different blocks, lowering checkpoint costs. Additionally, it consists of multiple modules, each serving the security of PoS networks.

The Future of Babylon and Token Status

Currently, Babylon does not have an official token, but it is expected that a potential BABY token will support the governance layer, based on industry parallels (e.g., EigenLayer). As the project is preparing for its mainnet launch, it has completed its testnet phase, and users are expected to be rewarded through a points system while providing liquidity.

You Might Be Interested In: Babylon Announces Official Foundation: Is Token Launch Coming?

Babylon Network Strategic Phases

Babylon Network is being rolled out in three phases, each unlocking the full potential of the protocol. The first phase begins with Bitcoin staking, aiming to create a solid and interoperable security layer for PoS blockchains, all while maintaining the self-custodial nature of Bitcoin.

Phase 1: Bitcoin Locking

The first phase lays the foundation by allowing Bitcoin holders to securely lock their BTC without losing ownership or control.

• BTC can be locked in users’ wallets without wrapping or bridging.
• Security audits were carried out to ensure the process’s robustness.
• A covenant committee was formed to oversee protocol safety and implementation.
• This phase focused on creating a secure environment for BTC to participate in staking activities.

Phase 2: Babylon Genesis Launch

The second phase marks the birth of Babylon Genesis, the first operational chain in the Babylon ecosystem. It introduced several essential components:

• A stable testnet (bbn-test-5) launched on January 8, 2025, for thorough testing.
• Mainnet went live, establishing Babylon Genesis as the foundation for the network.
• Finality Providers were activated to validate blocks and strengthen consensus.
• BTC holders from Phase 1 began staking their BTC on the Genesis chain.
• A Token Generation Event (TGE) took place, and the BABY token was officially distributed.
• An airdrop distributed BABY tokens to early users, contributors, and BTC stakers as a reward.

Phase 3: Bitcoin Multi-Staking

The final phase aims to scale Babylon by allowing Bitcoin to secure multiple PoS chains simultaneously, creating Bitcoin Secured Networks (BSNs).

• Babylon will integrate with more blockchains, allowing Bitcoin to secure diverse PoS ecosystems.
• Trust-minimized bridges for Liquid Staking Tokens (LSTs) will be created to enhance interoperability and liquidity.
• The Finality Provider network will be decentralized by bringing in more independent providers to improve trust and resilience.
• This phase will mark Babylon‘s full vision, transforming Bitcoin from a passive asset to a powerful force for cross-chain security.

Babylon Advantages

• Innovative design with the potential to make a market impact.
• Over 300,000 active users participated in testnet stages.
• Strong social media and influencer strategy.
• High scores in PR, SEO, and growth marketing.
• Raised $96 million from investors such as Paradigm, Polychain Capital, and Binance Labs.
• Strong partnership network and potential for exchange listings.
• The founding team includes experienced leaders, including a Stanford University professor.

Babylon Tokenomics

• Total Supply: 10 billion
• Token Distribution:
• 30.5% Early Private Round Investors
• 18% Ecosystem Development
• 18% Research and Development (R&D)
• 15% Community Incentives
• 18.5% Others

Babylon Investment and Funding Information

Babylon has raised a total of $96 million so far. Leading investors include Paradigm, Polychain Capital, Binance Labs (YZi Labs), Galaxy, HashKey Capital, Hack VC, and Framework Ventures.

• Seed Round (March 2023): $8M
• Series A (December 2023): $18M
• Latest Funding (May 2024): $70M

This strong financial support is a significant advantage for the project’s development and potential token listings.

Babylon Funding and Investment Information

Babylon offers a revolutionary opportunity to secure PoS chains through Bitcoin, providing both Bitcoin investors and blockchain infrastructure providers with a game-changing solution. As the project approaches its mainnet launch, it is poised to become one of the most prominent infrastructure projects in the 2025 crypto ecosystem, backed by strong partnerships and substantial investment.

Website: Babylon Website
X (Twitter): Babylon X
Litepaper: Babylon Litepaper

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Now carrying over $424.74 million in Ethereum, the wallet reflects a significant portion of Genesis’s ongoing asset management connected to bankruptcy. Liquidity issues caused Genesis, a branch of Digital Currency Group (DCG), to halt withdrawals in November 2022 after Three Arrow Capital collapsed. 2023 the lending platform filed for bankruptcy.

Allegations now included losses more than $3 billion; the corporation has been caught in a lawsuit brought by New York Attorney General Letitia James, claiming Genesis, DCG, and Gemini of hiding $1.1 billion in losses and misleading investors.

In May 2023 Genesis received court approval for a liquidation plan intended to reimburse creditors approximately $3 billion. Furthermore agreed to by the company was a $2 billion compensation. By August, it began providing creditors with assets and money worth $4 billion, so continuing its efforts to resolve the bankruptcy procedures.

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Genesis has completed the paperwork for its bankruptcy proceedings, and now it’s time to distribute the $4 billion worth of cryptocurrency to creditors. Having received all necessary court approvals for the sale in May, Genesis transferred $1.5 billion worth of Bitcoin and Ethereum on August 2nd to wallets believed to be linked to creditor payments.

The company holds a total of $4 billion worth of Bitcoin and Ethereum.

When it filed for bankruptcy last year, Genesis revealed it had over 100,000 creditors and debts of approximately $10 billion.

Given the vast number of both individual and institutional creditors, Genesis will not be able to make full repayments. Repayment percentages will vary depending on the creditor’s cryptocurrency holdings.

Bitcoin creditors can expect to recover 51.28% of their assets, while Ethereum creditors can recover 65.87%. For Solana, the recovery rate is only 29.58%.

In a statement, Genesis said:

Creditors may be entitled to additional distributions following the initial distribution, subject to ongoing claim resolution, contractual rights against third parties, and litigation outcomes.

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The wallet, labeled Genesis Trading, has transferred a total of more than 12,600 Bitcoins in the last 30 days, with the value of these Bitcoins approximately $719.9 million. These transfers generally occurred between 500 and 700 BTC. The wallet currently holds 33,356 Bitcoins, down from more than 46,000 BTC on June 12. This data is provided by Arkham Intelligence.

You might be interested: Breaking! US PPI Data Released! Here’s Bitcoin’s (BTC) First Reaction!

The multimillion-dollar Bitcoin transfers come two months after New York State Attorney General Letitia James announced that her office had reached a settlement with Genesis requiring it to pay $2 billion to defrauded investors who participated in its Earn program.

The address labeled Genesis Trading may be preparing to start refunding users. The wallet reportedly currently holds a total of $2.28 billion worth of cryptocurrencies, of which $1.91 billion is Bitcoin and $364 million is Ethereum.

This amount exceeds the $2 billion in digital assets that the platform must pay out to defrauded investors who participated in the Earn program.

On June 14, the New York Attorney General’s Office announced that more than $50 million had been recovered from Gemini and that the amount would be returned to investors in the exchange’s Earn program.

The agreement prohibits Gemini from operating any cryptocurrency lending programs in New York state. “Anyone deceived by Gemini will get their money back,” James said on the X platform. Gemini Trust said affected Earn users will be able to receive 100% of the assets owed to them within seven days.

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James stated, “Gemini marketed its Earn program as a way for investors to grow their money, but actually lied and locked investors out of their accounts. Today’s settlement will make defrauded investors whole and should remind cryptocurrency companies that deceiving investors is illegal and will not be tolerated by my office.”

The settlement ensures that all defrauded investors will fully recover the assets they invested in the Earn program but were unable to withdraw when the program collapsed. As part of the agreement, Gemini is also banned from conducting any crypto lending programs in New York state.

The NYAG filed a complaint in October against Gemini, the crypto lending firm Genesis, and the crypto investment company DCG. James asserted that Gemini lied to investors, repeatedly assuring them that investing in the Earn program through Genesis was low risk when it was, in fact, riskier. Meanwhile, DCG, Genesis, and two executives were accused of disguising $1.1 billion in losses through a months-long campaign of misstatements, omissions, and concealment.

Last month, Gemini announced that Earn users would recover $2.18 billion of their crypto in-kind, meaning customers who lent one bitcoin would receive one bitcoin back. These distributions represent a 232% recovery from when withdrawals were halted in November 2022, according to Gemini.

Gemini stated that “final Earn distributions” will be available in customers’ accounts within seven days. The company also expressed satisfaction with the settlement, saying, “We are pleased to announce that in connection with the final Earn distribution, Gemini has entered into an agreement with the New York Attorney General (NYAG) to settle the lawsuit brought against Gemini on October 19, 2023. We are excited to deliver this full recovery to you and appreciate your ongoing patience and support throughout this process.”

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Before deciding in favor of the plan, which would repay creditors nearly $3 billion in cash and assets, US bankruptcy judge Sean Lane dismissed objections from DCG, the Genesis Crypto Creditors Ad Hoc Group, and the Office of the United States Trustee.

Bypassing almost a year and a half of gains across the cryptocurrency industry, DCG had contended that claims should be valued in U.S. dollars at the time of the company’s bankruptcy filing in January 2023.

“DCG has objected to a plan in which it has no economic stake,” Judge Lane wrote in dismissing the complaint. “After unsecured creditors are satisfied, the record here unequivocally shows that the debtors’ estates are not worth enough to give DCG a recovery as an equity holder.” 

Simply put, creditors owing cryptocurrencies will be handled differently than creditors owing U.S. dollars under the plan, which calls for “a multi-step process that allocates assets to creditors by claim denomination and values these assets for distribution purposes.”

Judge Lane further said, “Due to the increase in price of digital assets after the time a resolution was reached, it is currently anticipated that those creditors whose claims are denominated in U.S. dollars will be receiving 100% of their loan balance (deferring payment of post-petition interest),” whereas creditors with claims in cryptocurrency will bear the shortfall in funds.

Although DCG might be able to contest the decision, Bloomberg reports, it’s not obvious what legal grounds they would have given the severe asset deficiency.

After learning of the verdict, Winklevoss twin-owned exchange Gemini issued a statement describing it as a “welcome decision,” but adding that “it does not impact the global settlement among Gemini, Genesis, and other creditors in the Genesis Bankruptcy previously approved by the Bankruptcy Court.”

The company said that as part of the Gemini Earn agreement, creditors will start getting the assets owing to them at the beginning of each month. The firm added that initially, around 97% of outstanding amounts will be reimbursed in-kind, meaning that a customer who placed one bitcoin into Gemini Earn will get that bitcoin back instead of the token’s U.S. dollar worth at that time.

This distinguishes Gemini’s bankruptcy reaction from FTX’s, which, per the present plan, will pay back consumers the dollar amount of their claims at the time FTX filed for bankruptcy.

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Initially, the bankruptcy claim marketplace Xclaim listed Genesis claims at 35% of their value, reflecting concerns about financial stability. In any case, recent developments have changed this outlook significantly.

Court-Approved Liquidation and Payout Details

Approximately 77% of customer claims will be allocated from the $3 billion in cash and crypto distributed by Genesis, according to recently approved court orders. Specifically, the parent company of Genesis, DCG, will not receive any payout from this distribution.

The size of the creditor claims makes it clear that DCG is out of the money as an equity holder by billions of dollars, said Judge Sean Lane. The decision was reached based on the fact that the value of the Debtors’ estates was insufficient to cover DCG’s recovery after unsecured creditors are paid.

Market Adjustments and Current Trading Values

Initially, bankrupt entities were able to sell their claims for 35% of their account balance value on Xclaim at the time of listing. Currently, the trading values have improved to a significant degree. Genesis asserts that bitcoin or ether are now trading between 97-110% for claims over $10 million. The percentage at which claims for fiat currency or stablecoins trade is 89-91% for accounts valued between $1-10 million, and 73-88% for claims below $1 million.

Interestingly, despite the positives for creditors, DCG will not benefit from the recovery plan. Previously, DCG had posited a strategy of capping customer claims at the value of cryptocurrencies as of January 2023 to facilitate their own recovery. However, the court valued creditor claims using DCG’s proposed method would still leave the company billions of dollars short, according to Judge Lane.

DCG’s Financial Troubles

A 10-year promissory note would be issued in response to a 1 billion debt assumption from the Three Arrows Capital collapse. That obligation, however, did not cover the losses to a considerable degree. Moreover, DCG missed payments on Genesis’s credit line, leading to a lawsuit.

In November 2023, following a repayment agreement, DCG paid $227 to Genesis. – A total of $3 million has already been paid, with plans to pay an additional $275 million by April to settle the $620 million lawsuit over missed loan payments.

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What is GBTC?

Grayscale Bitcoin Trust is a digital currency investment product that gives the option to invest in Bitcoin in the form of shares, following a more traditional approach. Unlike a direct investment in Bitcoin, which may require more attention and knowledge, GBTC allowed the investors a more simplified access to Bitcoin. Recently, in January 2024, the SEC approved Grayscale‘s application to turn the trust into an ETF.

Genesis’s Purchase

Genesis sold 36 million shares of GBTC at a price of $38.50, along with Ethereum trusts worth of $203 million. The total sale was about $2.1B, allowing the purchase of 32,041 Bitcoins on April 2 at a price of $65,685. Genesis’s purchase comes after Coinbase’s statement, “Our view is that much of these funds will likely remain within the crypto ecosystem, contributing to a neutral overall effect in the market.”. With this purchase, Genesis plans to settle its debt with Gemini Earn creditors.

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According to Bloomberg Law, the sale of GBTC shares was finalized on April 2, as stated in court documents filed yesterday.

A New York bankruptcy court granted Genesis permission to sell GBTC shares, along with shares in Grayscale Ethereum trusts, on February 14. At the time of the bankruptcy filing, the value of Genesis’s GBTC shares was nearly $1.4 billion, while its Grayscale Ethereum Trust shares were valued at $165 million, and its Grayscale Ethereum Classic Trust shares at $38 million.

Genesis filed for Chapter 11 bankruptcy protection in January 2023.

At current prices, the purchased bitcoins are valued at over $2.17 billion, as reported by Coin Engineer’s Bitcoin Price Page. These funds are expected to be used for customer repayment.

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