DCG Settles SEC Lawsuit for $38 Million Over Misleading Investors
In the latest development, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Digital Currency Group (DCG), accusing it of misleading investors by failing to disclose its exposure to collapsed hedge fund Three Arrows Capital (3AC).
DCG settles SEC lawsuit for $38 million
according to lawsuit ArchiveAs part of the lawsuit, DCG has submitted a settlement offer and agreed to pay $38 million as part of the settlement of the lawsuit brought by the SEC.
“In mid-June 2022, a large borrower failed to make a margin call, which harmed GGC’s business. However, Digital Currency Group negligently engaged in conduct that misleadingly downplayed the impact of the default and exaggerated the extent to which Digital Currency Group subsequently provided Help with what GGC is doing,” the document reads.
DCG has addressed the allegations without admitting or denying them.
Notably, SEC filings revealed that major cryptocurrency hedge fund Three Arrows Capital owes Genesis $2.4 billion in loans. Despite knowing that Genesis would lose at least $1 billion as a result of Sanjian’s collapse, DCG and Genesis continued to downplay the financial threat and mislead investors.
SEC accuses DCG of misleading public about Genesis financial condition
The SEC said in its complaint that DCG executives directed employees and its Genesis subsidiary to publicly downplay financial problems in the summer of 2022 and to strongly demonstrate the loan company’s condition.
Despite facing losses of more than $1 billion from the collapse of Three Arrows Capital, Genesis falsely claimed that its balance sheet was strong. Additionally, Genesis’ former CEO incorrectly stated that the company was “out of the danger of a Three Arrows default.” The SEC alleged that DCG failed to take appropriate action to prevent these misleading statements.
The SEC’s penalty against DCG sparked debate, with some critics saying it was more of a reaction than a solution. Additionally, the SEC’s action against DCG highlights the growing focus on ensuring transparency and accountability in the cryptocurrency industry. Although the regulatory environment for digital assets is complex, the move demonstrates a commitment to addressing potential risks and protecting investors.
