According to a Bloomberg report, crypto group Digital Currency Group (DCG) is under investigation by the U.S. Department of Justice’s Eastern District of New York and the U.S. Securities and Exchange Commission (SEC).
Citing people familiar with the matter, the report said authorities were investigating internal transfers between DCG and its crypto lending subsidiary Genesis Global Capital. Prosecutors have requested interviews and documents from the two companies while the SEC conducts a similar early investigation.
To date, no charges have been filed against either the DCG or the United States. The agency did not provide any information about the case. A spokesman for DCG said the company was not aware of an investigation:
“DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG.”
Genesis and Digital Currency Group Feeling Aftermath of FTX Contagion
Genesis was one of the companies hit by the contagion wave that followed November’s FTX crash. According to the company’s disclosure on Nov. 10, $175 million is locked in FTX trading accounts. Genesis halted payouts on November 16 due to liquidity problems and has worked with investment bank Moelis & Company to help with the restructuring.
Genesis owes cryptocurrency exchange Gemini $900 million. Together, they run a product called Gemini Earn, which allows crypto investors to earn 8% interest on their crypto loans. Gemini claims DCG failed to repay Genesis and prevented payments to Gemini’s customers.
Other DCG affiliates include Grayscale Investments, media company CoinDesk, cryptocurrency exchange Luno, and bitcoin mining company Foundry. Majority of Grayscale’s trusts are trading at a discount, with the Ethereum Classic Trust listing the largest discount as of Jan. 4 at 77%, followed by the Litecoin Trust at 65% and the Bitcoin Cash Trust at 57%.