DCG and Former Genesis CEO Settle SEC Charges for $38.5 Million

Digital Currency Group (DCG) and its former CEO, Soichiro "Michael" Moro, have agreed to pay a combined $38.5 million in civil penalties to settle charges for misleading investors about the financial condition of DCG's now-defunct subsidiary, Genesis Global Capital LLC. The Securities and Exchange Commission (SEC) announced the settlement on January 18, 2025.



According to the SEC's order, in mid-June 2022, Three Arrows Capital, a crypto asset hedge fund and one of Genesis's largest borrowers, defaulted on a margin call, which compromised Genesis's business. DCG and Moro, however, downplayed the impact of the approximately $1 billion loss and exaggerated what DCG did to help Genesis in the aftermath. Moro made false or misleading statements on Twitter, misleadingly characterizing Genesis's balance sheet as strong and falsely stating that Genesis had shed the risk related to the default. DCG executives retweeted certain of these statements. In addition, after DCG and Genesis entered into a promissory note with a 10-year term, Moro—with the knowledge and participation of DCG personnel—misleadingly tweeted that DCG had ensured that Genesis had "adequate capital to operate" when, in fact, DCG had not transferred any capital to Genesis.

"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," said Sanjay Wadhwa, Acting Director of the SEC's Division of Enforcement. "It is vital that companies and their officers speak truthfully to the investing public, especially in times of financial instability or turmoil."

Without admitting or denying the SEC's findings that they violated Section 17(a)(3) of the Securities Act of 1933, DCG and Moro agreed to a cease-and-desist order and to pay civil penalties of $38 million and $500,000, respectively.



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.

This settlement serves as a reminder to companies and their officers to maintain transparency and honesty in their communications with investors, especially during times of financial instability or turmoil. Investors should also be cautious and diligent in their research and due diligence when considering investments in the crypto and blockchain industries.