A new unspecified complaint from Bankrupt Crypto Lender Genesis shows internal communications with its parent company, the Digital Currency Group (DCG), suggested executives are aware of mismanagement of financial management and loving legal risks tied to their control over Genesis.
According to the Delaware Court of Chancery FileDCG’s financial official Michael Kraines, identified the risk that Genesis could be considered “alter ego.”
In a confidential memo shared with former Genesis CEO Michael Moro and others, Kraines laid out a “war -giving exercise” that prepares for legal arguments that can raise a plaintiff if Genesis collapses. The memo, which is attached to the complaint, the mirrors are now claimed in the lawsuit.
“The question in my mind is simply putting in ‘if Genesis is somehow blowing itself that somehow is the DCG tank in the depth of the board and shareholders?’ My prefatory thinking here is the following, ”Kraines wrote to Moro, indicating that they were preparing for an imminent legal collapse.
Related: CEO of Digital Currency Group Barry Silbert said he should only hold BTC
DCG ignored the warnings at risk
The filing further announced that the DCG has hired third-party risk counselors who have issued warnings that either have been ignored or acting late. The internal documents show DCG’s confession that Genesis is “flying blind” because its loan book is balloon from $ 4 billion to $ 12 billion.
External auditors have already dropped “significant lack and material weaknesses” in Genesis financial controls early in 2020.
A so -called “contagion” risk committee is formed within Genesis to reduce exposure. However, its first meeting did not occur until nine months after the DCG board approved. Kraines reported that the delay was “my future removal has been easier.”
The complaint also describes a toxic culture in the workplace where Genesis employees are expected to serve DCG’s interests at the cost of proper management.
An insider wrote that DCG maintains Genesis life “So (it) can pillage a balance sheet … Prop (Genesis), give (the) impression of stability (,) then borrow while they (ould) get the cash from it.” Genesis staff are internal referred to in the company’s environment as a “culture of submission.”
“These are not just technical misunderstandings in intercompany accounting,” Says The Genesis Litigation Oversight Committee. “The Delaware Complaint exposes a deliberate procedure by DCG and Barry Silbert to supplement Genesis as it collapses.”
The cointelegraph reached the DCG to comment but did not receive a response through the publication.
Related: Crypto firm’s losses Genesis has completed the repair
Public deception and controversial transactions
File also expresses public deception. It claims that Genesis staff is told to recite script messages after the Three arrow capital (3ac) collapseWhile DCG executives, including Barry Silbert, are the reeweet posts that have fallen into the crisis.
In addition, the complaint eases two controversial transactions. These include June 30, 2022, Promissory Note and the September 2022 “Roundtrip” Deal, both of which have been framing as attempts to hide the disappointment and misleading creditors.
Genesis ay Looking to recover more than $ 3.3 billion from DCG, Silbert and other insider.
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