SEC Takes Action Against Digital Currency Group for Misleading Investors

News

  • SEC has charged Digital Currency Group for misleading investors about Genesis Global Capital’s financial health.
  • DCG faces a $38 million penalty for failing to disclose financial instability of Genesis Global Capital.
  • SEC alleges DCG misrepresented GGC’s condition during the Three Arrows Capital default crisis.

The U.S. Securities and Exchange Commission has launched cease-and-desist proceedings against Digital Currency Group. The regulatory action stems from allegations of negligence related to a lending program offered by its subsidiary, Genesis Global Capital.

https://twitter.com/CryptoMarketCon/status/1880501687284273423

The SEC has imposed a $38 million civil penalty against Digital Currency Group as a result of these actions. The company has to pay this amount in 14 days using certified check or electronic transfer.

Alleged Misleading Statements of DCG on Financial Health

The SEC said that DCG misled investors about the financial stability of Genesis Global Capital. DCG did not register with the SEC and did not disclose any securities, the SEC contends. As the subsidiary suffered a large crisis, the company’s actions did not provide a clear model of GGC’s financial situation.

Genesis Global Capital, a subsidiary of DCG, started offering a crypto asset lending program in 2017. The program allowed retail investors to deposit some of their Bitcoin and other cryptocurrencies for interest. The money was then lent to institutional borrowers. GGC got into deeper financial trouble in June 2022 when Three Arrow Capital defaulted on a $2.4 billion loan.

The default left GGC with insufficient collateral to cover the loan, and the value of the collateral continued to decline. Despite these alarming developments, DCG executives reportedly directed employees to project stability. 

Misleading Investor Communication

The SEC claims that despite the worsening situation, DCG and GGC continued to project financial health. In June 2022, GGC made statements that its balance sheet remained strong, which were later retweeted by DCG. The SEC asserts these claims were misleading and they omitted crucial information about the exposure resulting from the default.

Furthermore, DCG allegedly created the appearance of stability by issuing a $1.1 billion promissory note to GGC. This action enabled GGC to report positive equity but was not disclosed to investors.

The post SEC Takes Action Against Digital Currency Group for Misleading Investors appeared first on Cryptonewsland.

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