Digital Currency Group Settles SEC Allegations For $38 Million

Digital Currency Group (DCG) agreed to a $38 million settlement with the U.S. Securities and Exchange Commission (SEC) over allegations of misleading investors through its subsidiary, Genesis Global Capital.

The SEC’s investigation centered on how DCG handled the fallout from a major default involving one of Genesis’ largest borrowers, Three Arrows Capital.

In June 2022, Three Arrows Capital failed to meet a margin call, severely impacting Genesis’ operations. The SEC claimed DCG downplayed the default’s effects and overstated its support for Genesis. Alongside DCG, former Genesis CEO Soichiro “Michael” Moro agreed to settle related charges for $500,000.

This settlement is the latest chapter in DCG’s ongoing regulatory troubles. New York Attorney General Letitia James sued Gemini, Genesis, and later its parent company, Digital Currency Group (DCG), over a Gemini crypto lending program. He alleged that they defrauded over 29,000 New Yorkers and concealed $1.1 billion in losses.

Genesis, which filed for bankruptcy in 2023, disclosed $10 billion in liabilities and owed $3 billion to its top creditors, including Gemini and VanEck, before completing its restructuring in August 2024. Genesis and Gemini began offering the program to retail investors in 2021, promising returns of up to 7.4% APY.

Genesis Global Holdco filed for bankruptcy protection in January 2023 after suffering massive financial losses from the collapses of crypto hedge fund Three Arrows Capital and crypto exchange FTX in 2022.

Genesis was a major provider of trading services to institutional clients before encountering challenges in 2023. That said, the settlement specifically involves Genesis Global Trading, a distinct entity from Genesis Global Capital. The latter, along with Gemini and Digital Currency Group, was the subject of a lawsuit filed by New York’s attorney general in October, alleging investor fraud in the Gemini Earn program.