Digital Currency Group, Former CEO of Subsidiary Genesis Global Capital Settle Charges with $38.5 Million Penalty

The Securities and Exchange Commission said that it had settled charges against Digital Currency Group Inc. (DCG), and Soichoro “Michael” Moro, the former CEO of DCG’s now-defunct subsidiary, Genesis Global Capital LLC. The settlement entails the payment of a civil penalty of $38.5 million. The SEC had alleged that Genesis misled investors about its financial condition.

Moro and DCG agreed to a cease and desist and to pay the penalty without admitting or denying the SEC charges.

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 harmed Genesis’s business.

The SEC claims that DCG and Moro downplayed the impact of the approximately $1 billion loss and exaggerated what DCG did to help Genesis in the aftermath.

According to the SEC, Moro made false or misleading statements on Twitter, characterizing Genesis’s balance sheet as strong and falsely stating that Genesis had shed the risk related to the default.

Additionally, after DCG and Genesis entered into a promissory note with a 10-year term, Moro allegedly tweeted that DCG had ensured that Genesis had “adequate capital to operate” when DCG had in fact not transferred any capital to Genesis.

Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, said that rather than being transparent about Genesis’s financial condition, DCG and Moro “painted a misleadingly rosy picture.”

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.



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