Digital Currency Group Under Scrutiny For Internal Transfers, SEC Investigates

Federal prosecutors in New York, along with the U.S. Securities and Exchange Commission, are investigating Digital Currency Group (DCG) for possible wrongdoing involving internal transfers at its lending subsidiary, Genesis.

DCG has reportedly received requests for documents and interviews by prosecutors in the Eastern District of New York, Bloomberg reported citing sources.

The SEC is conducting a separate investigation into DCG.

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The investigations have not yet been made public by authorities and are in the early stages. DCG CEO Barry Silbert has not been accused of any criminal conduct by authorities.

The criminal investigation by federal prosecutors into DCG reportedly began prior to the implosion of the cryptocurrency exchange FTX in November.

After FTX went bankrupt, Genesis paused withdrawals from its lending platform, citing "unprecedented market turmoil."

Before FTX collapsed, Genesis had already been impacted by the failure of the crypto hedge fund Three Arrows Capital (3AC).

In July, documents from 3AC's liquidation revealed that 3AC had received a $2.36 billion loan from Genesis Global Trading, a brokerage unit of Genesis.

Genesis Global Trading later filed a claim against 3AC for $1.2 billion, which resulted in a $1.1 billion promissory note due to DCG in 2023.

In November, it was also revealed that DCG had borrowed money from Genesis, with $575 million worth of intercompany loans due in May.

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