Digital Currency Group (DCG) has agreed to pay $38 million to settle charges filed by the U.S. Securities and Exchange Commission (SEC) over allegations related to its bankrupt subsidiary, Genesis Global Capital.
| Key Takeaways: – Digital Currency Group will pay $38 million to settle SEC charges over misleading investors about the financial health of its bankrupt Genesis subsidiary. – The SEC accused DCG and Genesis of downplaying the severity of financial losses caused by Three Arrows Capital’s default. |
The SEC accused Digital Currency Group of misleading investors and negligently failing to disclose the financial troubles of Genesis, particularly its exposure to Three Arrows Capital, a crypto hedge fund that collapsed in 2022.
The SEC stated that Genesis was owed $2.4 billion by Three Arrows, and the failure of the fund to meet a margin call in June 2022 left Genesis on the brink of significant financial losses.
Despite knowing that Genesis was on track to lose at least $1 billion due to the fund’s default, DCG continued to publicly downplay the severity of the situation. Executives reportedly instructed Genesis employees to portray financial strength, even as the firm was facing dire challenges.
In addition to the settlement with DCG, former Genesis CEO Soichiro “Michael” Moro has agreed to pay $500,000 to resolve charges of negligence in the matter. The SEC further highlighted that Genesis made misleading public statements about its financial health, including tweets by Moro that falsely claimed the company had “shed the risk” associated with Three Arrows Capital’s default.
The settlement follows ongoing scrutiny of Digital Currency Group, which has faced legal battles with regulators for years. The New York State Attorney General (NYAG) had previously sued DCG, Genesis, and crypto exchange Gemini in October, accusing them of defrauding over 29,000 New Yorkers out of more than $1 billion.
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