Digital Currency Group, Former Genesis CEO Charged by SEC over Misleading Investor Statements
The United States Securities and Exchange Commission (SEC) has levied charges against Digital Currency Group (DCG) and former Genesis CEO Soichoro "Michael" Moro for misleading investors about Genesis's financial condition following the collapse of Three Arrows Capital (3AC).
Civil Penalties
According to the filing dated January 17, DCG and Moro have agreed to pay a combined $38.5 million in civil penalties. DCG is liable for $38 million, while Moro is liable for $500,000.
Both parties agreed to the penalties without admitting or denying any violations of the Securities Act of 1933.
Genesis's Financial Troubles
This settlement stems from Genesis's Chapter 11 bankruptcy filing in January 2023. The filing was prompted by a 2022 default by 3AC, a former Genesis borrower.
Collapse of 3AC
The collapse of 3AC, a crypto hedge fund, had significant repercussions on the crypto industry, including Genesis. 3AC had invested heavily in Terra's LUNA token, which plummeted in value in May 2022.
This loss significantly impacted 3AC's balance sheet and its ability to repay loans. By June 16, 2022, 3AC failed to meet margin calls and was forced to liquidate assets.
Genesis's Response
In the aftermath of 3AC's collapse, Moro attempted to reassure investors that DCG and Genesis were managing the losses. However, the SEC has alleged that these statements were misleading.