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 intentionally misleading investors over the health of the failed division. DCG today settled those charges while neither admitting nor denying the allegations.

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

The “large borrower” in question is Three Arrows Capital, the once-prominent crypto hedge fund that flamed out in 2022 amid the collapse of Terra’s crypto ecosystem. Per the SEC filing, the bankrupt Three Arrows Capital had $2.4 billion worth of outstanding loans from Genesis, and DCG knew that Genesis was set to lose at least $1 billion from the fund’s collapse. Still, the SEC said that Genesis and DCG continued to act like its business was not threatened by the moves, despite that not being true.

Former Genesis CEO Soichiro “Michael” Moro will also pay a $500,000 settlement, per a separate SEC filing, for his role in the matter.

Editor’s note: This story is breaking and will be updated with additional detail.