Crypto conglomerate DCG is under investigation by US authorities.

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Digital Currency Group, better known as DCG, is currently under investigation by US authorities.

According to a Bloomberg report, US prosecutors in New York — specifically, the city of Brooklyn — are evaluating internal transfers between the multi-billion dollar crypto conglomerate and its crypto lending arm, Genesis Global Capital.

The crypto credit company has been in the spotlight for a long time after its heavy losses last year.

Relying on anonymous sources close to the investigation, federal prosecutors are already conducting hearings with certain personnel and asking for office documents.

Commenting on the case, a DCG spokesman denied that the US venture capital firm was under investigation.

He said:

DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge or reason to believe that there is an Eastern District of New York investigation into DCG.

That said, the Bloomberg report indicated that DCG could be embroiled in a two-way battle as the company is also under investigation by the Securities and Exchange Commission (SEC). However, so far there have been no indictments against DCG by either party, and no tangible information has been released by either US authority.

DCG and its relationship to Genesis

Genesis Global Capital’s troubles began in the middle of last year following the collapse of prominent hedge fund firm Three Arrows Capital. During this period, crypto lending services recorded heavy losses of $1.2 billion.

A few months later, Genesis also suffered another blow after billion dollar crypto exchange FTX filed for bankruptcy. The fall of FTX created a liquidity crunch for Genesis, which led the company to suspend withdrawal and loan requests to date.

To assuage public concerns, DCG has always distanced itself from Genesis’ continued statements that the company operates as a stand-alone entity.

In a circular to its shareholders in November 2022, DCG CEO and founder Barry Silbert disclosed all existing loans between the two companies. He further stated that all loans were made at arm’s length and repayment was structured based on market interest rates at the time.

Will the crypto market survive DCG?

Digital Currency Group is one of the largest crypto conglomerates in the industry, with an AUM value of $50 billion as of September 2021.

In addition to Genesis Global Capital, the company also has other subsidiaries, including Grayscale Investments – a major digital asset manager that holds over 600 BTC tokens, media publication CoinDesk, popular Bitcoin mining service Foundry, and Luno, a cryptocurrency exchange with over 10 million customers.

If the ongoing investigations into DCG by US authorities reveal any information causing negative sentiment around the conglomerate and its subsidiaries, the ripple effect could be quite catastrophic for the entire crypto market.

However, there is currently no indication of this happening and investors can remain calm pending the release of any further information on the investigations.

So far, the crypto market has been steadily recovering from FTX’s crash in November. As of this writing, market leader Bitcoin has gained 2.4% in the past seven days and is currently trading at $16,937.52 according to data from Coinbase. The first cryptocurrency holds the largest supply of crypto assets, with a total market capitalization of $326.141 billion.

BTC Trading with a Market Cap of $326.141 Billion | Source: BTC Chart at Tradingview.com

Featured Image: Daily FX, chart from Tradingview.com

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