#DCG to pay $38 million to settle#

The U.S. Securities and Exchange Commission (SEC) has charged Digital Currency Group (DCG) and its subsidiary, Genesis Global Capital, with concealing the true state of affairs by issuing false or misleading statements following the 2022 default of Three Arrows Capital, creating a materially misleading impression of Genesis’s financial condition to investors. The SEC alleged that DCG violated Section 17(a)(3) of the Securities Act, seeking a cease-and-desist order and a $38 million penalty against DCG. Specifically, the SEC charged that DCG, after the Three Arrows Capital default, inflated its balance sheet with a $1.1 billion promissory note, failing to disclose key terms to investors while making misstatements claiming the company's finances were “strong” when, in reality, Genesis was facing significant financial risks. Ultimately, Genesis halted withdrawals in November 2022 and filed for bankruptcy in January 2023. DCG settled these charges without admitting or denying them. This settlement is the latest in a string of enforcement actions against crypto companies as U.S. regulators appear to be cleaning house on their watchlist under the Biden administration.