Digital Currency Group Agrees to Settle SEC Charges for $38 Million

Digital Currency Group will pay $38 million to settle SEC charges filed over the crypto firm’s bankrupt Genesis Global Capital lending unit. The securities regulator had accused the company of negligence and deliberately misleading investors about the health of the failed division. DCG settled these charges today, without admitting or denying the allegations.

“In mid-June 2022, a major borrower defaulted on a margin call, jeopardizing GGC’s business,” Friday’s SEC filing reads. “Yet Digital Currency Group negligently engaged in conduct that misleadingly downplayed the impact of that bankruptcy and exaggerated what Digital Currency Group did to help GGC in the aftermath. In short, Digital Currency Group’s failure to exercise reasonable care gave the public a materially false impression about GGC’s financial health.”

The “big borrower” in question is Three Arrows Capital, the once-prominent crypto hedge fund that flared up in 2022 amid the collapse of Terra’s crypto ecosystem. According to the SEC filing, bankrupt Three Arrows Capital had $2.4 billion in outstanding loans from Genesis, and DCG knew Genesis would lose at least $1 billion from the fund’s collapse. Still, the SEC said Genesis and DCG continued to pretend their businesses were not threatened by the measures, even though that was not true.

Former Genesis CEO Soichiro “Michael” Moro will also pay a settlement of $500,000 per year. separate SEC filingfor his role in the case.

Editor’s note: This story is current and will be updated with additional details.