Crypto Firm DCG Settles With SEC For $38.5M Over Misleading Investors

Digital Currency Group (DCG), a prominent player in the cryptocurrency industry, has agreed to pay a $38.5 million settlement to the U.S. Securities and Exchange Commission (SEC) for allegedly misleading investors about the financial health of its subsidiary, Genesis Global Capital. The SEC accused DCG and its former CEO, Soichiro "Michael" Moro, of downplaying the impact of a default by Three Arrows Capital (3AC), a large borrower of Genesis, and exaggerating the efforts made by DCG to help Genesis in the aftermath.

The SEC's order, filed on January 17, 2025, stated that in mid-June 2022, 3AC defaulted on a margin call, which compromised Genesis' business. However, DCG and Moro negligently engaged in conduct that misleadingly downplayed the impact of that default and overstated what DCG did to help Genesis in the aftermath. This created a materially false impression to the public regarding Genesis' financial health.



DCG and Moro agreed to pay civil penalties of $38 million and $500,000, respectively, without admitting or denying the SEC's findings. They also agreed to a cease-and-desist order to prevent future violations of securities laws. The SEC's investigation was conducted by Yael Berger, Joy Guo, Amanda Rios, Ben Kuruvilla, Sam Wasserman, and William Garnett, assisted by Kenneth Gottlieb, and supervised by Mark R. Sylvester of the Crypto Assets and Cyber Unit and Jorge G. Tenreiro.

The settlement comes as the crypto industry faces increased scrutiny from regulatory bodies. Earlier this month, Robinhood agreed to pay $45 million to the SEC for a series of regulatory violations, while a group of financial firms, including Blackstone and KKR, settled with the SEC for $63.1 million over recordkeeping violations.

In a statement, Sanjay Wadhwa, acting director of the SEC's Division of Enforcement, said, "It is vital that companies and their officers speak truthfully to the investing public, especially in times of financial instability or turmoil. The Commission found that DCG and Moro fell short in that regard. Rather than being transparent about Genesis's financial condition and DCG's efforts to ensure Genesis's continued operation, DCG and Moro painted a misleadingly rosy picture."

The settlement is a reminder of the importance of transparency and accurate disclosure in the cryptocurrency industry, as well as the consequences of failing to meet these standards. As the industry continues to grow and evolve, investors and regulators alike will be watching closely to ensure that companies adhere to these principles.