Despite a deal to repay victims in full amid the 2024 bull market, Barry Silbert’s attempts to block payouts using legal tactics have plunged investors into uncertainty.
Barry Silbert’s background in finance and cryptocurrency, coupled with his involvement in the Genesis bankruptcy case, has sparked speculation and scrutiny.
Eric Asquith, a crypto investor, found himself thrust into the volatile world of cryptocurrencies when he realized he had lost his family’s savings of $1,052,000, following what he thought was a prudent investment strategy. Asquith had entrusted his funds to Gemini, a crypto exchange owned by Tyler and Cameron Winklevoss, which offered a savings-like account called Earn, promising attractive returns. Little did he know, his money had been redirected to Genesis, a crypto company owned by Barry Silbert, and subsequently used for high-risk investments.
The collapse of Genesis in January 2023 left Asquith and thousands of others in financial limbo, with their investments seemingly gone. Attempts at settlements faltered throughout 2023, with accusations flying between creditors and Silbert’s company, Digital Currency Group (DCG), as reported by Crypto News Flash. However, a turning point came when Sam Bankman-Fried, a prominent figure in the crypto world, was found guilty of fraud in November, coinciding with a resurgence in the crypto market.
Will Barry Silbert Repay Investors?
In a surprising twist, a deal was struck in February to repay all victims in full, leveraging the soaring prices of cryptocurrencies during the 2024 bull market. This provided hope to investors like Asquith, who eagerly awaited the return of their funds. However, their hopes were dashed when Silbert, using legal maneuvers, attempted to block the payout, arguing that the bankruptcy code entitled victims to only a fraction of the current value of their investments.
The ongoing legal battle has left investors frustrated and uncertain about the fate of their funds. While a ruling is expected in April, the outcome remains uncertain, with Silbert’s efforts to retain the funds he diverted facing scrutiny from creditors and regulators alike. As victims brace for further delays, they are left questioning the integrity of the crypto industry and the motivations of its key players, as per the report from NY Magazine.
“There’s a lot of speculation that Barry Silbert put Genesis into bankruptcy on purpose, given his expertise in bankruptcy and knowledge of the process and what he can obtain as a result,” Asquith told New York Magazine.
Silbert And His Background With Bankruptcy
Silbert’s intricate background, shaped by early exposure to the workings of the bankruptcy system and a successful career spanning finance and cryptocurrency, adds layers of complexity to the ongoing saga.
His prior ventures, notably the founding of SecondMarket and the establishment of the Grayscale Bitcoin Trust, underscore his deep involvement in financial markets and his adeptness in leveraging their nuances to his advantage.
In the Genesis bankruptcy case, Silbert’s defense revolves around interpreting the bankruptcy code’s mandate for claim valuation in U.S. dollars as of a specific date, coinciding with market lows for cryptocurrencies like Bitcoin.
During a pivotal hearing on March 18 overseen by Judge Sean H. Lane, legal representatives for creditors, Genesis, and Gemini contested Silbert’s stance, advocating for a more equitable valuation of digital assets comparable to unique collectibles.
However, attorneys for DCG, including Jessica Liou, rebutted by characterizing the victims’ arguments as unsupported by bankruptcy law, cautioning that any ruling favoring them might face challenges on appeal, prolonging the process of restitution.
The legal fray also encompasses a lawsuit filed by the New York Attorney General (AG), with potential ramifications that could significantly impact Silbert’s ability to retain the disputed funds. Should Silbert and DCG fail to disentangle themselves from the AG’s legal action, there looms the prospect of the state appropriating the funds for restitution, further complicating an already intricate legal landscape.
