The US Securities and Exchange Commission (SEC) has hit venture capitalist firm Digital Valuta Group (DCG) and a former Genesis executive with millions of dollars in fines, alleging they misled investors.
The regulator says it is fining DCG and Soichiro “Michael” Moro – the former CEO of crypto lending firm Genesis, a subsidiary of DCG – a combined $38.5 million for misleading investors about Genesis’ financial stability.
According to the SEC, DCG and Moro allegedly lied about Genesis’ financial health when a borrower of theirs, Three Arrows Capital (3AC), defaulted on a huge margin call in June 2022. The SEC says both Moro and DCG suffered the impact of the bankruptcy, which amounted to a loss of approximately $1 billion.
Additionally, Moro was found to make false or misleading statements on his Twitter account, labeling the company’s balance sheet as strong and claiming that Genesis had “sufficient capital to operate” after falsely claiming a deal with DCG to have closed.
As stated by the regulatory body in its court documents:
“In mid-June 2022, a major borrower defaulted on a margin call, which represented a compromise [Genesis’] company. Yet Digital Currency Group negligently engaged in conduct that misleadingly downplayed the impact of that bankruptcy and exaggerated what Digital Currency Group did to help [Genesis] in the aftermath.”
Genesis subsequently stopped customer withdrawals in November 2022 and filed for bankruptcy in January 2023.
As Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, said in the press release:
“It is critical that companies and their managers speak honestly to the investing public, especially during times of financial instability or turmoil. The Commission found that DCG and Moro were deficient on this point.
Rather than being transparent about Genesis’ financial condition and DCG’s efforts to ensure Genesis’ continued existence, DCG and Moro painted a misleadingly rosy picture.”
Although DCG and Moro have agreed to pay the fines, they have neither admitted nor denied the SEC’s findings.
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