Digital Currency Group (DCG) and Soichoro “Michael” Moro, the former CEO of its now-defunct Genesis subsidiary, have agreed to pay a total of $38.5 million in civil penalties to settle fraud charges in securities with the United States 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, DCG and Moro agreed to a cease and desist order. Neither DCG nor Moro admitted any wrongdoing. Moro is currently the Chief Strategy Officer at INX.
The accusations stem 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 dug a $1 billion hole. dollars on Genesis’ balance sheet.
“We are pleased to have concluded a thorough investigative process, limited in its findings and focused on social media posts and communications made by our former operating subsidiary, Genesis Global Capital,” a spokesperson for DCG at 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 crypto trading subsidiary, of working together to plug the massive hole by falsely claiming that DCG had absorbed the Genesis losses. What DCG allegedly did was issue Genesis a promissory note – essentially an IOU intended to create the appearance of liquidity – agreeing to pay Genesis $1.1 billion over 10 years at a interest rate of 1%. DCG denied that the promissory note was a sham.
“It is essential that companies and their leaders speak honestly to the investing public, especially in times of financial instability or crisis. The Commission found that DCG and Moro failed in this regard,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in a statement released Friday. “Rather than being transparent about Genesis’ financial situation and DCG’s efforts to ensure Genesis’ continued operations, DCG and Moro have painted a deceptively rosy picture.”
The SEC and Department of Justice reportedly began investigating DCG in 2023. James’ civil suit against DCG is ongoing. She is demanding $3 billion in fines.
