Crypto Conglomerate DCG Under Investigation by DOJ and SEC: Report

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Officials from the Eastern District of New York (EDNY) of the U.S. Department of Justice and the U.S. Securities and Exchange Commission are reviewing transfers between Digital Currency Group and the conglomerate’s Genesis subsidiary, Bloomberg reported Friday evening.

Prosecutors from the DOJ’s Eastern District of New York office have requested interviews and documents from DCG and Genesis, according to the report, while the SEC appears to be at a similar stage of its own investigation. The report, which quotes people familiar with the matter, says neither Genesis nor DCG, which is also CoinDesk’s parent company, have “been accused of wrongdoing.”

The investigations seem specifically focused on the financial interaction between Genesis and DCG, according to the report.

CoinDesk reported in late June that Genesis Trading was facing significant losses from loans to the now-imploded hedge fund Three Arrows Capital, later filing a $1.2 billion claim. DCG assumed Genesis’s claim.

In November, Genesis announced that its lending unit would suspend withdrawals, which impacted companies like Gemini, which relied on Genesis for its Earn platform. Gemini co-founder Cameron Winklevoss and DCG founder Barry Silbert have since begun to publicly feud over issues stemming from that suspension. Genesis has also made major layoffs in recent months, replacing its top management and nearly halving its workforce since August. The subsequent implosion of the FTX crypto empire further damaged the Genesis books.

Genesis has also brought in advisers to explore options, which could potentially include filing for Chapter 11 bankruptcy.

By early December, Genesis creditors had made claims totaling more than $1.8 billion, CoinDesk reported at the time.

Separately, another DCG subsidiary, Grayscale, is facing issues with its key Bitcoin trust product. A discount in the price of a share of the trust to the price of bitcoin exceeded 50% last month, indicating a lack of confidence in the product or in the ability of investors to make money from it.

The story continues

A DCG spokesperson told CoinDesk Saturday morning that “DCG has a strong culture of integrity and has always conducted its business legally. Eastern District of New York on DCG.

A Genesis spokesperson did not immediately return a CoinDesk request for comment. Bloomberg quoted a Genesis spokesperson as saying it “maintains a regular dialogue” with regulators but could not comment on any specific issues.

UPDATE 7 Jan 2023 17:30 UTC: Adds comments from DCG Spokesperson.

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