A federal judge revived a fraud claim against Barry Silbert and Digital Currency Group in an investor lawsuit over the failed Genesis Yield program last Thursday. Judge Stefan Underhill of the U.S. District Court for the District of Connecticut made the decision after plaintiffs argued the court had authority under the Class Action Fairness Act to consider their state-law claims. The case centers on Genesis Yield, a crypto lending program that suspended withdrawals before filing for bankruptcy in early 2023, with investors alleging defendants knowingly misled customers about the platform's financial health.
Judge Underhill Revives New York Fraud Claim Against DCG
The ruling filed last Thursday in the U.S. District Court for the District of Connecticut revises an earlier February decision. Judge Stefan Underhill agreed to bring state-law claims back before the court after reviewing plaintiff arguments. The judge revived the New York common law fraud claim while dismissing or staying most other state consumer protection claims. The court's February decision to allow the plaintiff's federal securities claims to proceed remains unchanged.
Genesis Yield Investors Allege Misleading Financial Disclosures
The class action lawsuit centers on Genesis Yield, a lending program that allowed customers to deposit crypto in exchange for interest payments. Investors allege Silbert, DCG and other defendants knowingly misled customers about Genesis' financial health and risk controls before the platform suspended withdrawals. Genesis later filed for bankruptcy in early 2023. DCG has previously called similar allegations "baseless" and stated it would vigorously defend itself. The judge found that the allegations were sufficient for the common law fraud claim to move forward.
Court Dismisses or Stays Multiple State Consumer Protection Claims
Consumer protection claims in California, Florida, and New York were put on hold by the court. Claims under Illinois, Kansas, Nevada, and Texas law were dismissed. The New York common law fraud claim was the only state-law claim revived by Judge Underhill's ruling last Thursday.
FAQ
What did Judge Underhill decide in the Genesis Yield lawsuit last Thursday?
Judge Stefan Underhill revived a fraud claim against Barry Silbert and Digital Currency Group in the U.S. District Court for the District of Connecticut. The judge revised an earlier February decision after plaintiffs argued the court had authority under the Class Action Fairness Act to consider their state-law claims. The New York common law fraud claim was revived while most other state consumer protection claims were dismissed or stayed.
What allegations do investors make against DCG in the Genesis Yield case?
Investors allege that Silbert, DCG and other defendants knowingly misled customers about Genesis' financial health and risk controls before the platform suspended withdrawals. Genesis Yield was a lending program that let customers deposit crypto in exchange for interest payments before it filed for bankruptcy in early 2023. DCG has previously called similar allegations "baseless" and stated it would vigorously defend itself.
