Genesis sues DCG executives for ignoring risk warnings related to poor financial management.

[Chain News] PANews, June 25 - According to reports, a newly unsealed lawsuit document indicates that the bankrupt encryption lending company Genesis has accused its parent company Digital Currency Group (DCG) executives of ignoring risk warnings as Genesis was heading toward collapse and of alleged financial mismanagement.

The document shows that DCG’s Chief Financial Officer Michael Kraines warned in an internal memorandum that a collapse of Genesis could have serious implications for DCG and its shareholders, and he conducted a “simulation” of the legal defenses. However, DCG has been accused of not taking timely action and even ignoring warnings from third-party risk advisors.

In addition, Genesis’s loan scale surged from $4 billion to $12 billion, but financial controls had significant flaws pointed out by auditing firms as early as 2020. Although a “Contagion Risk Committee” was established to mitigate risks, its first meeting was delayed for nine months.

The lawsuit also revealed a “culture of obedience” within Genesis, where employees were required to prioritize the interests of DCG and were even asked to disseminate a unified message after the collapse of Three Arrows Capital (3AC). The documents also mentioned two controversial transactions, including a promissory note from June 2022 and a “circular transaction” from September, which were accused of attempting to cover up the fact of insolvency.