The US District Attorney for the Eastern District of New York and the Securities and Exchange Commission (SEC) are investigating money transfers between Digital Currency Group (DCG) and its subsidiary Genesis. Bloomberg reported late on Jan. 6.
Federal prosecutors have asked DCG and Genesis for interviews and documents, and the SEC appears to be conducting an early-stage investigation as well, it said. The article also cites a person familiar with the matter as saying that the two companies were not “accused of wrongdoing.” DCG is the parent company of CoinDesk.
The investigation appears to be specifically focused on the financial interrelationships between DCG and Genesis.
Subsidiary Genesis in trouble
Genesis Trading reportedly suffered heavy losses in June from a loan to bankrupt crypto hedge fund Three Arrows Capital. He later demanded the return of $1.2 billion. DCG assumed Genesis’ debt.
Genesis then implemented massive layoffs, nearly halving its workforce since August and replaced management. However, in November, FTX, which was regarded as the savior of the industry at the time, went bankrupt. Genesis’ damage was further expanded.
Genesis announced that it would stop withdrawing money from its lending division, hitting cryptocurrency exchange Gemini and others that used its services. Gemini co-founder Cameron Winklevoss and DCG founder Barry Silbert are openly at odds over the matter.
Genesis has also hired advisors to weigh its options going forward, and is reportedly considering filing for Chapter 11 bankruptcy.
In early December, Genesis creditors demanded more than $1.8 billion in total.
Grayscale also faces big discount rates
In addition to Genesis, DCG’s other subsidiary, Grayscale, is facing problems with its flagship product, the Bitcoin mutual fund.
In December, the trust’s trading price against its underlying asset, bitcoin, exceeded a 50% discount rate, highlighting the trust’s lack of credibility.
“DCG has a culture of integrity and has always operated in compliance with the law,” a DCG spokesperson said on the morning of the 7th. “There is no reason to believe that we are being harassed,” he said in a statement.
A spokeswoman for Genesis has yet to comment. Bloomberg quoted a Genesis spokesperson as saying that it “maintains regular dialogue” with regulators but cannot comment on specific issues.
｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
| Image: CoinDesk archives
｜Original: Crypto Conglomerate DCG Being Investigated by DOJ, SEC: Report