US Authorities Investigating Financial Transactions between DCG and Genesis

UTC by Benjamin Godfrey · 3 min read
US Authorities Investigating Financial Transactions between DCG and Genesis
Photo: Shutterstock

The crypto winter has exposed the frailty in the business models of many companies in Web3, and the implosion of the FTX Derivatives Exchange back in November further aggravated the financial inconsistencies in Genesis and DCG as a whole.

United States (US) authorities including the Securities and Exchange Commission (SEC) and the Department of Justice’s Eastern District of New York (EDNY) are reportedly investigating embattled Digital Currency Group (DCG) and its almost bankrupt subsidiary, Genesis. According to a Bloomberg report, the US authorities opened an investigation into the companies to examine the transfer of funds between both firms.

DCG is a crypto empire that boasts some of the biggest companies in the digital currency ecosystem as its subsidiary. Beyond Genesis, these subsidiaries include Grayscale Investments, Bitcoin (BTC) mining company, Foundry, media outlet Coindesk, and crypto exchange, Luno.

Per the Bloomberg report, citing sources familiar with the probe, the regulators at the DoJ have already requested documents for review and have sent interview invites to concerned parties. With the internal transactions under review, the SEC is also reportedly making the same probes. Per the sources, neither the company nor its Chairman, Barry Silbert have not been accused of any wrongdoing.

In a statement shared with Bloomberg, the Digital Currency Group said it is not yet aware of any probe from either of the regulators.

“DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG,” the company said.

Genesis revealed in another statement that it does not comment on ongoing legal proceedings.

“Genesis maintains regular dialogue and cooperates with relevant regulators and authorities when it receives inquiries,” it said.

The crypto winter has exposed the frailty in the business models of many companies in Web3, and the implosion of the FTX Derivatives Exchange back in November further aggravated the financial inconsistencies in Genesis and DCG as a whole.

US Authorities Probe into DCG: the Brawl With Gemini

Like any other industry, entities in the cryptocurrency industry have intricate business relationships, one of which might have notably attracted the US authorities to DCG and Genesis.

Silbert revealed in a letter to shareholders back in November last year, noting that it owes $575 million in loans from Genesis that are due. Additionally, Silbert said it assumed a $1.1 billion deficit for Genesis drawing on the fallout of the firm’s exposures to hedge fund, Three Arrows Capital (3AC) which went bankrupt last year.

American crypto exchange, Gemini, has accused Genesis of being unable to pay the $900 million owed to its Earn customers, a situation that has stirred a public brawl between Silbert and the trading platform’s CEO, Cameron Winklevoss. It is unknown whether this transaction is amongst those the SEC and the DOJ are looking into, however, similar probes from the regulators might uncover more inconsistencies in the finances of the embattled companies.

For now, the concern is whether DCG is still liquid enough to fulfill its debt obligations despite Silbert saying the firm “has never missed an interest rate payment to Genesis and is current on all loans outstanding.”

Blockchain News, Cryptocurrency news, News
Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

Related Articles