Digital Currency Group Settles with SEC for $38 Million

Global investment firm Digital Currency Group (DCG) agreed to settle and pay $38 million to the U.S. Securities and Exchange Commission (SEC) over allegations of misleading investors through its crypto lender Genesis Global Capital, LLC.

The SEC highlighted that one of Genesis’ largest borrowers was hedge fund Three Arrows Capital (TAC), which failed to meet a margin call on June 13, 2022. DCG was accused of negligently downplaying the impact of this default while overstating its support to Genesis during this crisis.

Former Genesis CEO Soichiro “Michael” Moro will also pay $500,000 in a separate SEC settlement due to negligence charges.

According to the SEC, Genesis updated DCG executives daily regarding concerns over TAC’s default in mid-June 2022. Although DCG tweeted about Genesis’ financial state several times, the SEC deemed these communications as “false or misleading.”

Both DCG and Moro did not admit or deny the SEC’s findings. A DCG spokesperson stated that the settlement allows them to focus on growth, emphasizing their commitment to integrity in business practices.

The SEC also noted that Moro had downplayed the default’s impact by posting misleading statements on social media, such as claiming that Genesis had “shed the risk” related to TAC’s default.

DCG has faced increased regulatory scrutiny, notably from the New York State Attorney General, who sued DCG along with Gemini and Genesis over the Gemini crypto lending program, alleging fraud against over 29,000 New Yorkers amounting to over $1 billion.

Genesis filed for bankruptcy in 2023, disclosing liabilities of up to $10 billion and over 100,000 creditors, including significant debts to firms like Gemini and VanEck. The restructuring was completed in August 2024.