DCG Under Investigations Internal Money Transfer By US And SEC

Key Points:

• DCG is facing investigation by the SEC and RED over internally transferred funds to its subsidiaries.
• The financial investigation centers around DCG and Genesis.
• Investigators have requested interviews and documents from Digital Currency Group and Genesis.

Officials with the Eastern District of New York (EDNY) of the US Department of Justice and the US Securities and Exchange Commission are examining money transfers between Digital Currency Group (DCG) and the group’s Genesis subsidiary, Bloomberg reported late January 6.

The report said prosecutors at the DOJ’s Eastern District office in New York had requested interviews and documents from DCG and Genesis. At the same time, the SEC is at a similarly early stage of the investigation check. The report, citing people familiar with the matter, said that both Genesis and DCG were “allegedly engaged in misconduct.”

According to the report, the questions focus on the financial interplay between Genesis and DCG.

The investigation is still in the early stages. A person familiar with the investigation said the inquiry into DCG began long before FTX went bankrupt.

Genesis had previously faced a $1.2 billion loss due to loans made to the now-bankrupt Three Arrows Capital hedge fund.

Following the crash of FTX in November 2022, Genesis announced that its lender would suspend withdrawals. This has a knock-on effect on companies like Gemini, which relies on Genesis for its Monetization platform.

Gemini co-founder Cameron Winklevoss and DCG founder Barry Silbert have begun to clash openly over issues arising from this suspension.

Genesis has also made several significant layoffs over the past few months, replacing executive leadership and halving its headcount since August.

Genesis has also tapped advisors to explore options, including filing for Chapter 11 bankruptcy. As of early December, Genesis creditors have filed claims totaling up to $1.8 billion.

The collapse of FTX has engulfed the entire crypto market in recent months. However, the investigation into this collapse is still complicated as there are too many parties involved, the company’s operating documents are unclear and the person believed to be responsible is the Sam Bankman-Fried (SBF) recently pleaded not guilty.

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