PANews reported on January 18 that according to Decrypt, Digital Currency Group (DCG) will pay $38 million to settle the US SEC's allegations of loan fraud against its subsidiary Genesis Global Capital. The securities regulator accused the company of negligence and misleading investors about the health of its bankruptcy department. DCG settled the allegations, neither admitting nor denying them.
According to documents filed with the U.S. Securities and Exchange Commission: “In mid-June 2022, a large borrower failed to pay its security deposit on time, which harmed GGC’s business. However, Digital Currency Group was negligent and took misleading actions to downplay the impact of the default and exaggerate Digital Currency Group’s efforts to help GGC afterwards. In short, Digital Currency Group failed to exercise reasonable care and gave the public a materially false impression of GGC’s financial condition.”
The “big borrower” in question is Three Arrows Capital, a once-prominent crypto hedge fund that went bankrupt in 2022 amid the collapse of the Terra crypto ecosystem. According to SEC filings, bankrupt Three Arrows Capital had $2.4 billion worth of outstanding loans to Genesis, and DCG knew that Genesis would lose at least $1 billion from the fund’s collapse. Despite this, the SEC said Genesis and DCG continued to act as if their business was not threatened by these moves, even though this was not the case.
