The Fallout from FTX’s Collapse Continues
FTX’s collapse had a significant impact on the crypto industry, and even now, almost a year later, its consequences are still being felt. Sam Bankman-Fried, the co-founder and former CEO of FTX, has recently been found guilty and is awaiting sentencing.
A Lesser-Known Fraud in 2022
While FTX’s collapse garnered much attention, Bitcoin author Vijay Boyapati believes that a larger and more complex fraud took place in 2022 but went largely unnoticed by mainstream media. Boyapati took to social media platform X (formerly Twitter) to detail this alleged fraud committed by DCG and its CEO, Barry Gilbert.
The Genesis Fraud Exposed
Boyapati claims that Digital Currency Group (DCG) and its affiliates misled creditors about the solvency of Genesis, a cryptocurrency brokerage. Despite announcing bankruptcy after FTX’s fall in November 2022, Boyapati alleges that Genesis had been insolvent since June 2022 due to losses in the Terra Luna ecosystem. However, Genesis employed deceptive tactics to hide these losses on their balance sheet.
Troubles for Three Arrows Capital
Genesis played a crucial role as a Bitcoin lender for crypto hedge fund Three Arrows Capital (3AC) and lending platform BlockFi. However, when the premium of Grayscale Bitcoin Trust (GBTC) over the net asset value of Bitcoin disappeared, causing financial difficulties for Three Arrows Capital. The collapse of the Terra Luna ecosystem further exacerbated their insolvency.
The Bankruptcy of Genesis
Boyapati argues that Genesis went bankrupt when it couldn’t repay its Bitcoin lenders if they requested withdrawals. DCG then assumed a $1.2 billion claim with a promissory note, which turned out to be a scheme to deceive Genesis’ clients about its solvency.
The Motive Behind the Scheme
DCG had an 18,697 BTC loan from Genesis, so it had a vested interest in maintaining the illusion of solvency. If Genesis declared bankruptcy, DCG would also have to repay this loan.
Legal Consequences and Media Ignorance
The New York Attorney General has filed a $1 billion civil complaint against Genesis, DCG, and executives Barry Silbert and Michael Moro. Boyapati believes that the fraud involving DCG is comparable to the FTX scandal but has received less media attention. If proven, this complaint could lead to criminal charges.
Hot Take: A Massive Fraud Overlooked by Mainstream Media
The aftermath of FTX’s collapse continues to reverberate throughout the crypto industry. However, Bitcoin author Vijay Boyapati argues that a much larger fraud went unnoticed in 2022. This alleged fraud involves Digital Currency Group (DCG) and its CEO, Barry Gilbert, who deceived creditors about the solvency of Genesis, a cryptocurrency brokerage. Despite mainstream media’s lack of coverage, the New York Attorney General has filed a $1 billion civil complaint against Genesis, DCG, and its executives. If proven true, this case could have significant legal ramifications and potentially lead to criminal charges.
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