Digital Currency Group agrees to pay $38 million to settle with SEC over negligence

Quick Take

  • The SEC said that one of Genesis’ largest borrowers was asset hedge fund Three Arrows Capital and said on June 13 that the fund “failed to meet a margin call.”
  • “Digital Currency Group negligently engaged in conduct that misleadingly downplayed the impact of that default,” the SEC said in a filing on Friday.  

Global investment firm Digital Currency Group agreed to settle and pay $38 million to the U.S. Securities and Exchange Commission on Friday over allegations that it misled investors via crypto lender Genesis Global Capital, LLC. 

The SEC said that one of Genesis' largest borrowers was asset hedge fund Three Arrows Capital and said on June 13 that the fund "failed to meet a margin call."

"In mid-June 2022, a large borrower defaulted on a margin call, which compromised GGC’s business," the SEC said in a filing on Friday. "Yet, Digital Currency Group negligently engaged in conduct that misleadingly downplayed the impact of that default and overstated what Digital Currency Group did to help GGC in the aftermath."

Former Genesis CEO Soichiro "Michael" Moro also agreed to settle with SEC and pay $500,000 over charges involving negligence. 

The SEC said Genesis updated executives at DCG daily in the second part of June over concerns about Three Arrows Capital's default and its exposure. Mid-June, DCG reposted on X a few times about Genesis' financial situation, but the SEC said those were "false or misleading."

DCG and Moro did not admit or deny the SEC's findings. 

A DCG spokesperson said the settlement allows it to move forward and focus on growth.

“We are pleased to have concluded an extensive investigation process that was limited in its findings and focused on the social media posts and communications made by our former operating subsidiary, Genesis Global Capital. 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," the DCG spokesperson said in an email. 

In a separate filing, the SEC said Moro "downplayed" the effect of the default and posted on X that Genesis had "shed the risk" tied to Three Arrows Capital's default.

"Moro edited, reviewed, and approved this tweet before issuing it from his personal Twitter account," the SEC said. "This tweet was materially false or misleading because Genesis remained exposed to movements in the value of the collateral associated with the TAC loan."

DCG has been in the crosshairs of regulators for years. The New York State Attorney General The NYAG sued crypto exchange Gemini, crypto lender Genesis and its parent company DCG in October over the Gemini crypto lending program. At the time, James said the three entities defrauded more than 29,000 New Yorkers of more than $1 billion. James also said DCG and Genesis "disguised $1.1 billion in losses through a months-long campaign of misstatements, omissions, and concealment."

Genesis filed for bankruptcy in 2023 and completed its bankruptcy restructuring in August 2024. When filing for bankruptcy, Genesis disclosed it had over 100,000 creditors and had as much as $10 billion in liabilities. It owed approximately $3 billion to its top 50 creditors, including Gemini, asset manager VanEck and trading firm Cumberland.

Update: Jan. 17, 6:05  p.m. UTC to include details throughout and a statement from DCG


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About Author

Sarah is a reporter at The Block covering policy, regulation and legal happenings. Before, Sarah was a reporter with CQ Legal writing about securities regulation, which is where she first started reporting on crypto. Sarah has also written for The Bond Buyer and American Banker, among other finance-related publications. She graduated from the University of Missouri and earned a degree in print and digital journalism. Sarah is based in Washington D.C., and is an avid coffee lover. You can follow her on Twitter @ForTheWynn.

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