Quick take:
- The two separate cases all pointed to offences related to misleading investors.
- Digital Currency Group was slapped with a penalty of $38 million, while Moro was asked to pay $500,000.
- In the filing, the SEC charged DCG of negligently engaging in conduct that misled investors in a lending program offered and sold to investors through its subsidiary Genesis Global Capital.
The U.S. Securities and Exchange Commission (SEC) has charged Digital Currency Group (DCG) for misleading investors through services offered by its subsidiary Genesis Gloabal Capital LLC (GGC) in July 2022.
The U.S. securities regulator also charged Genesis CEO Michael Moro citing offences related to misleading investors.
Both charges come just days before the SEC chair Gary Gensler leaves office on January 20.
The SEC charged the DCG of negligently engaging in conduct that misled investors in a lending program offered and sold to investors through GGC.
“GGC comingled investors’ assets and typically lent those assets out to institutional borrowers—generating revenue by charging interest to those borrowers. In mid-June 2022, a large borrower defaulted on a margin call, which compromised GGC’s business,” the SEC wrote in the filing.
According to the regulator, this conduct “misleadingly downplayed the impact of that default and overstated what Digital Currency Group did to help GGC in the aftermath.”
The SEC says DCG failed to exercise reasonable care, which created “a materially false impression to the public regarding GGC’s financial health.”
GGC suspended withdrawals in November 2022 after facing a wave of redemption requests and filed for bankruptcy in January 2023. DCG has been asked to pay a penalty of $38 million within 30 days.
Meanwhile, Moro who was the CEO of Genesis Global when securities offences were committed has been charged with negligently engaging in conduct that misleadingly
downplayed the impact of that default and overstated what Genesis’s parent company, Digital Currency Group (“DCG”). He has been asked to pay a penalty of $500,000 within 30 days.
Both these charges come as the SEC cleans up some of the pending cases labelled against various crypto companies ahead of the new leadership, which takes over after Trump’s inauguration.
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