A federal judge has revived a key fraud claim against Barry Silbert and Digital Currency Group (DCG) in litigation stemming from the collapse of Genesis’ Yield product, reopening another front in the sprawling post‑bankruptcy disputes.
What changed
- Judge Stefan Underhill of the U.S. District Court for the District of Connecticut revised a February order to permit a New York common‑law fraud claim to move forward. Plaintiffs had persuaded the court that the Class Action Fairness Act (CAFA) gave the federal court jurisdiction to hear certain state‑law claims.
- The revision narrows which state‑law claims can proceed: consumer protection claims under Illinois, Kansas, Nevada and Texas were dismissed, while claims under California, Florida and New York were put on hold (stayed). The February ruling allowing federal securities claims to proceed is unchanged.
Background and allegations
- Genesis Yield was a program that let customers deposit crypto to earn interest. Investors contend that Silbert, DCG and other defendants misrepresented Genesis’ financial health and risk controls even as the lending arm was under severe stress — allegations that preceded Genesis’ freezing of withdrawals and bankruptcy filing in early 2023.
- The revived New York fraud count does not resolve the merits; it simply allows that portion of the lawsuit to advance.
Where this fits in the larger legal picture
- The revived claim adds to multiple legal tracks targeting DCG and Silbert. In 2025, Genesis itself sued DCG, Silbert and insiders seeking to recover more than $1 billion in alleged improper transfers.
- Genesis entered bankruptcy after the implosions of Three Arrows Capital and FTX worsened pressure on crypto lenders. A bankruptcy judge approved a 2024 plan that let Genesis distribute billions in cash and crypto to creditors and rejected a DCG challenge.
- Genesis also reached a $2 billion settlement with the New York Attorney General to create a victims’ fund for creditors.
- Separately, DCG and former Genesis CEO Soichiro “Michael” Moro agreed to pay $38.5 million to settle U.S. Securities and Exchange Commission charges that they misled investors about Genesis’ finances; they did not admit or deny the SEC’s findings. DCG has previously called the civil fraud allegations “baseless” and said it will defend itself.
Bottom line
The court’s revision keeps New York common‑law fraud and existing federal securities claims alive, while other state consumer claims are paused or dismissed. The decision intensifies legal scrutiny on DCG and Silbert but does not determine whether the alleged misconduct occurred.
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