Federal Judge Reinstates New York Fraud Claim Against Barry Silbert, DCG in Genesis Yield Suit

A federal judge has reinstated a New York common-law fraud claim against Barry Silbert and Digital Currency Group (DCG) tied to litigation over Genesis' now-defunct Yield product, giving plaintiffs a renewed avenue in the post-bankruptcy legal fight. U.S. District Judge Stefan Underhill (District of Connecticut) amended a February order after plaintiffs argued that the Class Action Fairness Act (CAFA) provides federal jurisdiction for certain state-law claims. The change allows the New York fraud count to proceed. The revision also trims the case's state-law footprint. Consumer protection claims under Illinois, Kansas, Nevada and Texas law were dismissed. Claims under California, Florida and New York were stayed. The court left intact its February ruling permitting federal securities claims to move forward. Genesis Yield allowed customers to deposit crypto in exchange for interest. Investors allege Silbert, DCG and other defendants misrepresented Genesis' financial condition and risk controls as the lending business came under mounting stress, before Genesis froze withdrawals and filed for bankruptcy in early 2023. The reinstated New York claim does not address the merits of the allegations; it simply keeps that portion of the lawsuit alive. The decision adds to a widening set of proceedings involving DCG and Silbert. In 2025, Genesis sued DCG, Silbert and insiders seeking to claw back more than $1 billion in alleged improper transfers. Genesis entered bankruptcy after the collapses of Three Arrows Capital and FTX intensified pressure across crypto lending. A bankruptcy judge approved a 2024 plan enabling Genesis to distribute billions of dollars in cash and crypto to creditors and rejected a challenge from DCG. Genesis also agreed to a $2 billion settlement with the New York Attorney General to establish a victims' fund for creditors. In a separate matter, DCG and former Genesis CEO Soichiro "Michael" Moro agreed to pay $38.5 million to settle U.S. Securities and Exchange Commission allegations that investors were misled about Genesis' finances, without admitting or denying the SEC's findings. DCG has previously described the civil fraud claims as "baseless" and said it will defend itself. The revised order keeps the New York fraud claim and the federal securities counts in play, while other state consumer claims are either paused or thrown out. The ruling raises legal pressure on DCG and Silbert, but it does not determine whether misconduct occurred.