According to Bloomberg, the inquiries, which appear to be in their early stages, are focused on financial transfers between DCG and its Genesis unit.
According to Bloomberg, officials from the United States Department of Justice’s Eastern District of New York (EDNY) and the United States Securities and Exchange Commission are investigating transfers between Digital Currency Group and the conglomerate’s Genesis subsidiary.
According to the report, prosecutors with the DOJ’s Eastern District of New York office have so far requested interviews and documents from DCG and Genesis, while the SEC appears to be in a similar early stage of its own investigation. According to the report, which cited people familiar with the situation, neither Genesis nor DCG, which is also the parent company of CoinDesk, have “been accused of wrongdoing.”
According to the report, the inquiries appear to be centred on the financial interactions between Genesis and DCG.
CoinDesk reported in late June that Genesis Trading was facing significant losses as a result of loans made to the now-defunct hedge fund Three Arrows Capital, and that it had filed a $1.2 billion claim. Genesis’ claim was taken over by DCG.
Genesis and DCG representatives did not immediately respond to requests for comment. On Friday, a DCG spokesperson told Bloomberg that the company was not aware of any EDNY investigation, while a Genesis spokesperson told the news outlet that the company “maintains regular dialogue” with regulators but couldn’t comment on specific issues.
Genesis announced in November that its lending unit would suspend withdrawals, affecting companies such as Gemini, which relied on Genesis for its Earn platform. Gemini co-founder Cameron Winklevoss and DCG co-founder Barry Silbert have since begun publicly feuding over the suspension’s ramifications. Genesis has also made significant layoffs in recent months, replacing its executive leadership and nearly halving its workforce since August. Genesis’ books were further harmed by the subsequent implosion of crypto empire FTX.
Genesis has also hired advisers to investigate options, which could include filing for Chapter 11 bankruptcy.
As of early December, Genesis creditors had filed claims totaling more than $1.8 billion, according to CoinDesk.
Grayscale, another DCG subsidiary, is also experiencing issues with its key bitcoin trust product. Last month, the price of a share of the trust relative to the price of bitcoin fell below 50%, indicating a lack of confidence in the product or investors’ ability to cash out.
Genesis and DCG representatives did not immediately respond to requests for comment. On Friday, a DCG spokesperson told Bloomberg that the company was not aware of any EDNY investigation, while a Genesis spokesperson told the news outlet that the company “maintains regular dialogue” with regulators but couldn’t comment on specific issues.
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