#DCG Settles with SEC for $38 Million Fine#

The Securities and Exchange Commission (SEC) has charged Digital Currency Group (DCG) and its subsidiary, Genesis Global Capital, with misleading investors by making false or misleading statements about its financial condition in 2022 after a major financial risk from the default of Three Arrows Capital. The SEC alleged that DCG and Genesis’ former CEO Michael Moro violated Section 17(a)(3) of the Securities Act, seeking to stop the violations, and imposing a $500,000 penalty on Moro and a $38 million penalty on DCG. Specifically, the SEC alleged that DCG concealed the financial condition of Genesis after the Three Arrows Capital default, and issued misleading public statements exaggerating the level of support DCG provided to Genesis. The SEC also charged Moro with knowing about the relevant risks but approving false statements claiming the company’s financial condition was "strong" and inflating its balance sheet with an $1.1 billion promissory note without disclosing key terms to investors. Ultimately, Genesis halted withdrawals in November 2022 and filed for bankruptcy in January 2023. DCG has settled the charges, neither admitting nor denying the allegations. This settlement is the latest example of the SEC’s regulatory action in the cryptocurrency industry, and the latest case of the SEC taking action against alleged fraud in crypto companies.