Genesis sues DCG for having a "second self" plan, ignoring warnings, and fabricating lies.

According to Gate News bot, as reported by Cointelegraph, a recent lawsuit disclosed by the bankrupt crypto assets lending company Genesis reveals that internal communications within its parent company Digital Currency Group (DCG) indicate that executives are aware of Genesis's poor financial management and the imminent legal risks associated with its control over Genesis.

According to documents from the Delaware Chancery Court, DCG CFO Michael Kraines acknowledged that Genesis could be seen as DCG's "second self ( alter ego )."

In a confidential memorandum shared with former Genesis CEO Michael Moro and others, Kraines conducted a "war game" — preparing for potential legal arguments that plaintiffs might raise after Genesis's collapse. This memorandum is attached to the complaint and mirrors the core claims of the current litigation.

"The question in my mind is, 'If Genesis were to somehow self-destruct, would this somehow severely impact DCG, thereby seriously harming the interests of its board and shareholders?'" Kraines stated in a letter to Moro that they are preparing for the upcoming legal consequences.

The filing further disclosed that DCG engaged a third-party risk advisor and issued serious warnings, but these warnings were either ignored or acted upon too late. Internal filings show that DCG acknowledged that Genesis was "going blind" in the process of inflating the size of the loan from $4 billion to $12 billion.

As early as 2020, external auditors pointed out that Genesis's financial controls had "significant deficiencies and material weaknesses." To mitigate risks, Genesis established a so-called "contagion" risk committee internally. However, the committee's first meeting was not held until nine months after it was approved by the DCG board.

An insider wrote that DCG allowing Genesis to continue "is to plunder the balance sheet... support Genesis to create an impression of stability, and then take the opportunity to borrow money and cash out." Genesis employees internally refer to the company culture as a "culture of compliance."

The document also accuses Genesis of public deception. It states that after the collapse of Three Arrows Capital (3AC), Genesis employees were instructed to recite pre-prepared information, while DCG executives, including Barry Silbert, forwarded posts that downplayed the crisis.

In addition, the complaint also revealed two controversial transactions. These two transactions include a promissory note dated June 30, 2022, and a "round-trip" transaction from September 2022, both of which were accused of attempting to conceal bankruptcy and mislead creditors.

Genesis is seeking to recover over $3.3 billion in funds from DCG, Silbert, and other insiders.