Grayscale’s IPO Ambitions Amid Legal Challenges
In the midst of Grayscale’s ambitious plans for a $33 billion initial public offering (IPO), serious legal challenges linked to the downfall of Genesis Global Capital threaten to overshadow this significant milestone. Barry Silbert, the CEO of Digital Currency Group (DCG), is at the forefront of Grayscale’s public debut, marking a potential first for a cryptocurrency asset manager.
Legal Complications from Genesis Litigation
The impending IPO is becoming increasingly complicated due to two lawsuits initiated by the Genesis Litigation Oversight Committee (LOC) in May 2025, which are making claims in both Delaware’s Court of Chancery and the Southern District of New York Bankruptcy Court. The complaints assert that Silbert and DCG operated Genesis irresponsibly, alleging that they regarded the firm as a cash reservoir for their own financial interests and engaged in reckless practices that led to its bankruptcy. The LOC is seeking restitution in the form of cryptocurrency to rectify the losses suffered by Genesis creditors.
One of the lawsuits filed in bankruptcy court demands the recovery of over $1.2 billion, suggesting that several transfers prior to Genesis’s collapse, including purportedly unauthorized payments related to a non-existent tax sharing agreement, should be returned. In response, DCG and Silbert are striving to dismiss these lawsuits, insisting they acted appropriately amidst a severe market downturn that adversely affected many cryptocurrency lenders.
Silbert’s Role and Industry Scrutiny
Despite the legal upheaval, Silbert is reasserting his influence within Grayscale by returning as chair of its board, a crucial position as the company works towards its IPO. Industry analysts believe that this turmoil will attract considerable scrutiny from both underwriters and regulatory bodies who will be evaluating DCG’s financial dealings with Genesis ahead of any public offering.
Background of Legal Strife
The roots of this legal strife stretch back to the collapse of Three Arrows Capital in June 2022, which defaulted on loans exceeding $2.36 billion owed to Genesis. DCG intervened with a $1.1 billion promissory note, but this arrangement has ignited various legal disputes. Genesis claims that DCG concealed its financial difficulties before filing for bankruptcy by utilizing the note dishonestly. This prompted a countersuit from DCG in August 2025, where it seeks relief on the promissory note and claims to have made unwarranted payments totaling $106 million, which they argue shouldn’t have occurred after the note’s value dropped to zero.
Genesis’s Legal Actions and Regulatory Involvement
Meanwhile, Genesis has been proactive in pursuing its own legal actions, targeting over $2.2 billion in cryptocurrency and claiming that DCG has engaged in fraudulent transfers amounting to over $1 billion while the firm grappled with cash flow troubles. As part of this offensive, Genesis alleges that $450 million in cryptocurrency and nearly $300 million in international transactions were extracted improperly by DCG.
The situation has worsened with regulatory bodies getting involved. In January 2025, the U.S. Securities and Exchange Commission (SEC) levied a $38 million fine on DCG and a $500,000 penalty on former Genesis CEO Michael Moro for misleading investors about the financial viability of Genesis after the major collapse. Court documents from the SEC’s investigation highlighted that executives at DCG were aware of significant losses at Genesis, yet falsely portrayed the company as stable.
Additional Legal Challenges
Adding to the complications, entities tied to Genesis are also facing legal challenges. A notable case involves the FTX Recovery Trust, which has filed a $1.15 billion lawsuit against Genesis Digital Assets, alleging misconduct related to the sale of shares at inflated prices by Sam Bankman-Fried, founder of FTX.
Grayscale’s Commitment to IPO
Despite this growing web of litigation, Grayscale remains committed to its IPO ambitions, recently submitting confidential paperwork to the U.S. SEC in June, indicating their determination to persevere amidst the legal storm.
