A U.S. federal judge has revived a New York common law fraud claim against Barry Silbert, Digital Currency Group (DCG), and other defendants in a class-action lawsuit tied to the failed Genesis Yield program. The ruling, filed last Thursday in the District of Connecticut by Judge Stefan Underhill, amends an earlier February 2026 decision and now allows the fraud claim to move forward alongside existing federal securities claims.
The plaintiffs successfully argued that the court has jurisdiction under the Class Action Fairness Act to consider state-law violations. Judge Underhill agreed, breathing new life into the central fraud allegation. While most other consumer protection claims were either dismissed or temporarily halted—specifically, suits in California, Florida, and New York were stayed, and those in Illinois, Kansas, Nevada, and Texas were dismissed—the revived fraud count gives investors an additional path to pursue liability beyond the securities framework.
The case centers on Genesis Yield, a crypto lending platform that allowed customers to deposit digital assets for interest payments. Investors claim that Silbert, DCG, and others knowingly misled them about Genesis's financial health and risk controls. The platform suspended withdrawals in November 2022 and filed for bankruptcy in early 2023, following the collapse of major counterparty Three Arrows Capital, which accounted for nearly 30% of Genesis’s loan book.
DCG has previously labeled the allegations as “baseless” and said it would defend itself vigorously. The court’s latest order does not determine the truth of the accusations but finds the plaintiffs’ pleadings sufficient for the fraud claim to proceed. The federal securities claims—already upheld in February—remain unchanged, and the case now enters a discovery phase where internal documents and communications will be examined.
The ruling underscores the lingering legal fallout from crypto lending products that boomed before the 2022 downturn. It also highlights questions about parent-company accountability and the accuracy of risk disclosures in products that straddle the line between traditional finance and digital assets.
