A report on Friday disclosed that Digital Currency Group (DCG) was under investigation by the Securities and Exchange Commission (SEC) and federal prosecutors in New York.
The investigation was due to the internal transfers it had made to Genesis, its lending subsidiary. The Eastern District of New York’s prosecutors has sent requests for interviews and documents to DCG.
People familiar with the matter also reported that DCG was also under investigation by the securities regulator in the United States.
The authorities have not yet made their investigations public because they are just starting to take shape.
In addition, they have not accused Barry Silbert, the CEO of the company, nor DCG itself, of any criminal conduct.
A spokesperson for the company said that the company’s culture for agriculture is a strong one and it has engaged only in lawful business practices.
The spokesperson further stated that they did not have any knowledge or reason to believe that DCG was being investigated by prosecutors in New York.
As for Genesis’ spokesperson, they did not confirm anything regarding the investigation, claiming that they do not comment on any regulatory or legal cases.
The company said that they maintain routine communication with relevant authorities and regulators and cooperate with them when they get any inquiries.
It was last Wednesday when claims of an investigation into Genesis and DCG by the SEC had first begun popping up on Twitter.
According to one commentator, a DCG whistleblower was working with the SEC directly and had tipped them off about the investigation.
The federal prosecutors had initiated their criminal investigation into DCG before the sudden implosion of the FTX crypto exchange in November.
Not long after FTX’s collapse, Genesis hit a pause on withdrawals via its lending platform due to turmoil in the market.
Not only does DCG owns Genesis, but it is also the parent company of crypto exchange Luno, CoinDesk, the popular crypto news site, and Foundry Digital, the crypto mining service provider.
Even before FTX had gone bankrupt, Genesis had been struggling due to its exposure to crypto hedge fund Three Arrows Capital (3AC), which had also filed for bankruptcy a few months earlier.
In July, documents from the liquidation of the hedge fund had disclosed that Genesis’ brokerage unit named Genesis Global Trading had issued a loan of $2.36 billion to 3AC.
A claim had been filed by Genesis Global Trading worth $1.2 billion against 3AC, which its parent company had assumed.
This had seen a promissory note issued to DCG worth $1.1 billion in 2023. It had been revealed in November that Genesis had also loaned money to DCG.
The intercompany loans of DCG that are due in May to Genesis are worth $575 million. Crypto exchange Gemini has recently put some pressure on Genesis.
This is due to the fact that the crypto lender owes money to the exchange of $900 million for its high-yield lending product known as Gemini Earn.
Co-founder of Gemini, Cameron Winklevoss had accused Silber of using stall tactics in bad faith recently.