SEC’s Final Strike on Crypto Industry Ahead of Administration Change

The U.S. Securities and Exchange Commission (SEC) has taken legal action against Digital Currency Group (DCG), the largest digital asset manager, and its former subsidiary Genesis Global Capital.

The allegations center on misleading investors about the financial fallout from the 2022 collapse of crypto hedge fund Three Arrows Capital (3AC).

The SEC accuses DCG and Genesis of downplaying the impact of 3AC’s failure, which resulted in a $1 billion loss for Genesis after the fund defaulted on a major margin call. According to the investigation, both entities misrepresented Genesis’s financial stability, spreading deceptive statements to mask the severity of the crisis.

Former Genesis CEO Soichiro Michael Moro allegedly played a key role in these misrepresentations, making public claims on social media that Genesis had neutralized risks tied to 3AC’s collapse and maintained a solid balance sheet.

The SEC further states that DCG executives amplified these statements, even as the company’s financial health was in jeopardy. Additionally, the agency found that a 10-year promissory note issued between DCG and Genesis was misleadingly presented as a capital transfer, despite no such transaction taking place.

To resolve the charges, DCG has agreed to a $38 million settlement, while Moro will pay $500,000, according to the SEC.