The U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are about to investigate Silbert’s Crypto Giant Digital Currency Group (DCG) for internal transfers.
According to several reports, prosecutors for the Eastern District of New York Office of the DOJ have so far requested interviews and documents from DCG and Origin, while the SEC appears to be in a similar early stage of its investigation. Neither Genesis nor DCG, which is also CoinDesk’s parent company, have so far “been accused of wrongdoing.”
The questioning specifically focused on the financial interactions between Genesis and DCG. Genesis Trading was facing large losses due to loans made to now-defunct hedge fund Three Arrows Capital, with the latter filing a $1.2 billion claim. DCG accepted the claim for origin.
What is Digital Currency Group?
Digital Currency Group (DCG) is a venture capital company focusing on the digital currency market. It is located in Stamford, Connecticut.The company has five subsidiaries which are CoinDesk, Foundry, Genesis, Grayscale Investments, and Luno.
Digital Currency Group was launched in 2015 by Barry Silbert, a graduate of Emory University. who previously was CEO of SecondMarket, Inc. He began investing in blockchain technology companies in 2013. Shortly after SecondMarket’s sale, Silbert formed Digital Currency Group, with Genesis and Grayscale becoming the first of the company’s subsidiaries.
Genesis
Genesis Trading was facing large losses due to loans made to now-defunct hedge fund Three Arrows Capital, with the latter filing a $1.2 billion claim. DCG accepted the claim for origin. DCG took a heavy hit over Genesis’ financial troubles. In addition, Genesis was heavily affected by the collapse of Three Arrows Capital (3AC), one of the companies that declared bankruptcy after the Terra-Luna crash.
The FTX collapse a few months later didn’t help Genesis’ healing process. Shortly after the FTX collapse, on Nov. 16, Genesis halted customer withdrawals. Then, on Jan. 5, the lender laid off 30% of its staff and signaled it might file for chapter 11 bankruptcy by saying it is trying to reduce costs and increase efficiency.
The troubles of Genesis got connected to the crypto exchange Gemini. Gemini founders, the Winklevoss twins, claimed that Silbert owed Genesis $1.675 billion, and a part of this dept belonged to Gemini’s Earn program users.
Even though Silbert replied to the twins and said that the DCG didn’t have any outstanding debt to Genesis, the twins refused to accept and asked Silbert to stop pretending as if he and the DCG were “innocent bystanders and had nothing to do with creating this mess.”
