DCG to pay $38m in SEC settlement for misleading investors

Former Genesis CEO Michael Moro was sanctioned by the U.S. Securities and Exchange Commission in a 2023 lawsuit filed against its parent company, Digital Currency Group.

Digital Currency Group, a crypto-focused investment conglomerate, has reached a $38 million settlement agreement with the SEC for misleading investors about the risks of the now-defunct hedge fund Three Arrows Capital.

Court documents filed Friday, January 17 allege that DCG misled investors through Genesis Global Capital, LLC, its crypto lending subsidiary.

The SEC claimed that GGC and DCG agreed on a $1.1 billion promissory note to artificially inflate the lender’s balance sheet. Genesis investors were unaware of the 2022 note, which the SEC said violated federal regulations.

Executing the note to create positive balance sheet equity without disclosing the terms of the note to GGC’s investors allowed Digital Currency Group and GGC to hide how and whether Digital Currency Group had intervened to resolve the problems caused by the TAC default.

SEC Court Filing

Former Genesis CEO Michael Moro agreed to pay $500,000 in civil penalties to settle the charges. The defendants were also ordered to cease committing further violations of federal rules.

Genesis filed for bankruptcy in 2023, revealing up to $10 billion in liabilities and more than 100,000 creditors. Major creditors like Gemini and VanEck were owed a total of $3 billion, according to court filings.

Regulators have been suing DCG and its subsidiaries since 2023 over widespread industry failures in 2022. New York Attorney General accused DCG, Genesis and crypto exchange Gemini defrauded 29,000 investors of $1 billion through Gemini’s Earn program. Genesis had previously agreed to a $21 million settlement with the SEC in the Gemini Earn lawsuit.