tl;dr
The US Securities and Exchange Commission (SEC) has taken enforcement actions against Digital Currency Group (DCG) and its subsidiary Genesis, ordering DCG to pay a $38 million civil penalty and comply with a cease-and-desist order. The SEC accused DCG and its former CEO of misleading investors abou...
The US Securities and Exchange Commission (SEC) has taken enforcement actions against Digital Currency Group (DCG) and its subsidiary Genesis, ordering DCG to pay a $38 million civil penalty and comply with a cease-and-desist order. The SEC accused DCG and its former CEO of misleading investors about their financial health following the collapse of one of Genesis' largest borrowers.
The SEC has also sanctioned the former CEO, Soichiro “Michael” Moro, for approving misleading statements and participating in crafting public communications that downplayed the severity of Genesis’ financial troubles. He was fined $500,000 and barred from engaging in negligent conduct that misleads investors.
The SEC accused the crypto conglomerate and its former CEO, Soichiro “Michael” Moro, of misleading investors about the financial health of their operations. The charges stem from alleged negligence in public disclosures and financial maneuvers following the collapse of one of Genesis’ largest borrowers, Three Arrows Capital (3AC), in mid-2022.
The SEC’s case against DCG centers on the company’s actions following 3AC’s default on a $2.4 billion loan, which left Genesis with a substantial financial shortfall. According to the SEC, DCG executives knew that Genesis faced losses exceeding $1 billion but directed efforts to project an image of financial stability.
DCG executed a $1.1 billion promissory note to artificially inflate Genesis’s balance sheet. The SEC claims that while the note created an accounting asset, it did not involve a tangible capital transfer, and its terms were not disclosed to investors. This maneuver allowed Genesis to report positive equity as of June 30, 2022, despite its precarious financial position.
By January 2023, DCG had filed for bankruptcy, leaving investors and retail customers with substantial losses.
The SEC has also sanctioned Soichiro “Michael” Moro, who served as CEO during this tumultuous period. The filing accuses Moro of approving misleading statements and participating in crafting public communications that downplayed the severity of Genesis’ financial troubles.
According to the SEC, Moro personally approved tweets asserting that Genesis had “shed the risk” related to 3AC’s default and that its balance sheet remained robust. He was fined $500,000 and barred from engaging in negligent conduct that misleads investors.