Digital Currency Group (DCG) and Soichoro “Michael” Moro, former CEO of its now-defunct Genesis subsidiary, have agreed to pay a combined $38.5 million in civil penalties to resolve securities fraud charges before the Securities and Exchange Commission. US Securities and Exchange Commission (SEC). .
The crypto venture capital firm will bear the brunt of the financial penalty, paying $30 million in fines, while Moro will be personally liable for a $500,000 fine. In addition to the fines, both DCG and Moro agreed to a cease and desist order. Neither DCG nor Moro admitted wrongdoing. Moro is currently the chief strategy officer at INX.
The charges arise from DCG and Genesis’ response to the collapse of crypto hedge fund Three Arrows Capital (3AC), Genesis’ second-largest borrower, in the summer of 2022, which left a billion-dollar hole in Genesis’ balance sheet. Genesis.
“We are pleased to have concluded an extensive investigative process that was limited in its findings and focused on social media posts and communications made by our former operating subsidiary, Genesis Global Capital,” a DCG spokesperson told CoinDesk. “DCG has always strived to conduct its business with the highest integrity and we believe our actions related to Genesis were consistent with that approach.”
Regulators, including New York Attorney General (NYAG) Letitia James, had accused DGC and Genesis, its wholly owned cryptocurrency trading subsidiary, of working together to plug the gaping hole by falsely claiming that DCG had absorbed the Genesis losses. What DCG had allegedly done was issue Genesis a promissory note – essentially a promissory note intended to create the appearance of liquidity – committing to pay Genesis $1.1 billion over the course of 10 years at 1% interest. DCG has denied that the note was a sham.
“It is vital that companies and their officials speak truthfully to the investing public, especially in times of instability or financial turmoil. The Commission concluded that DCG and Moro fell short in that regard,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in a statement Friday. “Instead of being transparent about Genesis’ financial situation and DCG’s efforts to ensure Genesis’ continued operations, DCG and Moro painted a deceptively optimistic picture.”
The SEC and the Department of Justice reportedly began investigating DCG in 2023. James’ civil case against DCG is ongoing. She is asking for $3 billion in fines.
