By Katherine Hamilton
Digital Currency Group is required to pay $38 million for misleading investors about the financial strength of its crypto subsidiary Genesis Global Capital.
The Securities and Exchange Commission is giving Digital Currency 14 days from the entry of its order to pay the penalty, arguing it violated the Securities Act.
In the summer of 2022, Digital Currency misled investors in a lending program for retail investors through its subsidiary Genesis Global Capital, the SEC alleged. The GGC program offered retail investors yield in return for bitcoin and other crypto assets, which it lent out to institutional borrowers.
One of those borrowers defaulted on a margin call that summer, compromising GGC’s business, but Digital Currency downplayed the impact of the default, the SEC said. This created a false impression of GGC’s financial health.
When GGC faced a wave of redemption requests in November 2022, it was unable to satisfy them and suspended withdrawals. It filed for bankruptcy in January 2023.
The SEC is charging former Genesis Global Capital Chief Executive Soichoro Moro an additional $500,00 as part of the penalty.
Write to Katherine Hamilton at katherine.hamilton@wsj.com
(END) Dow Jones Newswires
January 17, 2025 13:30 ET (18:30 GMT)
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