Crypto Conglomerate DCG Under Investigation by DOJ and SEC

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Cryptocurrency conglomerate Digital Currency Group, or DCG, is reportedly under investigation by the United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). The authorities are said to be mainly looking into internal transfers from DCG to its subsidiary Genesis.

Digital Currency Group is under investigation by the DOJ’s Eastern District of New York and the SEC according to reports by Bloomberg. The investigation is reportedly focused on internal transfers between DCG and its subsidiary crypto lending firm Genesis Global Capital. The DOJ has already requested interviews and documents from both parties, while the SEC is undertaking a similar inquiry. As it stands, no indictment had been brought against any of the parties involved.

Among DCG’s subsidiaries are Genesis, Grayscale Investments, media outlet CoinDesk, cryptocurrency exchange Luno, and Bitcoin mining company Foundry.

Genesis Already in Trouble

In June 2022, Genesis Trading was facing major losses following the fall of crypto hedge fund Three Arrows Capital, and later filed a claim for $1.2 billion – DCG assumed the claim for Genesis. The company has also been adversely affected by the collapse of FTX and according to the firm’s disclosure, it had $175 million locked up in an FTX trading account.

The firm’s lending unit also suspended withdrawals due to liquidity issues in November and undertook major layoffs over the past couple of months, nearly halving its headcounts since August, and talk of filing for Chapter 11 bankruptcy has been rumored.

Genesis’ issues are further compounded as it owes $900 million to crypto exchange Gemini with who they operated a product called Gemini Earn in which investors can earn 8% interest on their crypto loans. According to reports, Gemini claims that DCG failed to repay Genesis, leading to the failure of payments to Gemini’s clients.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.