#DCG to pay $38 million to settle SEC lawsuit#

Digital Currency Group (DCG) has agreed to settle with the U.S. Securities and Exchange Commission (SEC) for a $38 million fine to resolve charges that the SEC brought against its subsidiary Genesis Global Capital for lending fraud. The SEC alleged that DCG was negligent and misled investors about the health of Genesis’s bankrupt lending arm. Specifically, the SEC pointed out that in mid-June 2022, a large borrower, Three Arrows Capital, failed to make timely margin calls, which damaged Genesis’s business. However, DCG downplayed the impact of the default and exaggerated its efforts to assist Genesis, thereby misleading investors. The SEC argued that DCG failed to exercise reasonable care, which led to the public having a false impression of Genesis's financial condition. While DCG settled the charges, it neither admitted nor denied them. It’s worth noting that Three Arrows Capital went bankrupt in 2022 amid the collapse of the Terra crypto ecosystem, at which time it held $2.4 billion in outstanding loans from Genesis. DCG knew at the time that Genesis would lose at least $1 billion from the fund’s collapse but continued to behave as if its business was not threatened by these actions.