The SEC stated that Digital Currency Group did not provide sufficient information about the organization's operations, causing investors to place their trust in the wrong place.

Digital Currency Group was fined $38 million by the SEC for defrauding investors. Image: The Block

The digital asset management company Digital Currency Group (DCG) has agreed to pay a $38 million fine to the U.S. Securities and Exchange Commission (SEC) to settle an investigation targeting the organization. The misconduct discovered at DCG was the provision of information that did not fully reflect the truth about Genesis Global Capital, a DCG subsidiary that operated in the cryptocurrency lending sector but went bankrupt in January 2023.

SEC Charges Digital Currency Group for Misleading Investors: Filinghttps://t.co/NxEWqCHJd2

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The SEC stated that one of Genesis' largest clients was Three Arrows Capital, a cryptocurrency investment fund that went bankrupt in July 2022 and was unable to repay the loan it had previously taken out.

However, Digital Currency Group deliberately downplayed the incident and claimed that the company's operations were unaffected, creating a sense of safety for investors to avoid a massive withdrawal of assets. The Genesis management at the time regularly updated DCG on the actual situation, but the company still insisted to the media that it was not involved and not significantly impacted.

Former Genesis CEO Soichiro "Michael" Moro was also fined $500,000 by the SEC.

In addition to the SEC, DCG has also come under the scrutiny of the New York authorities, who are investigating the Genesis bankruptcy and the relationship between this entity, DCG, and the Gemini exchange, leading to the freezing of over $1 billion in Gemini user assets.

Digital Currency Group is also the parent company of Grayscale, an organization that manages many large cryptocurrency investment funds, including two listed and traded Bitcoin and Ethereum ETFs.

Compiled by Coin68