Digital Currency Group to pay $38 million to resolve SEC charges
Digital Currency Group Inc. (DCG) and Soichoro “Michael” Moro, the former CEO of Genesis Global Capital LLC, have agreed to pay a total of $38.5 million in civil penalties as part of a settlement with the Securities and Exchange Commission (SEC). The charges against DCG and Moro stem from allegations that they misled investors about the financial condition of Genesis Global Capital LLC.
According to the SEC’s findings, the charges arose when Three Arrows Capital, a major borrower of Genesis, defaulted on a margin call in June 2022, which significantly impacted Genesis’s operations. Despite the billion-dollar loss, DCG and Moro downplayed the severity of the situation and misrepresented their response to the default. Moro made false or misleading statements on Twitter, falsely characterizing Genesis’s financial health as strong and claiming that they had mitigated the risks associated with the default. DCG executives further amplified these misleading claims by retweeting them. Additionally, following a 10-year promissory note agreement between DCG and Genesis, Moro tweeted misleading statements about Genesis having sufficient capital to operate, despite DCG failing to transfer any capital to the subsidiary.
The SEC noted that transparency and honesty are crucial for companies and their executives, particularly during periods of financial instability. However, DCG and Moro failed to provide accurate information about Genesis’s financial status and their efforts to sustain its operations. Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, emphasized the importance of truthful communication with investors and the public, especially during times of turmoil. He highlighted DCG and Moro’s failure to be transparent about the financial reality of Genesis and their misleading portrayal of the company’s condition.
DCG and Moro neither admitted nor denied the SEC’s findings that they violated Section 17(a)(3) of the Securities Act of 1933. As part of the settlement, they agreed to a cease-and-desist order. DCG will pay a civil penalty of $38 million, while Moro will pay $500,000.
The SEC’s investigation into this matter was led by Yael Berger, Joy Guo, Amanda Rios, Ben Kuruvilla, Sam Wasserman, and William Garnett, with assistance from Kenneth Gottlieb, under the supervision of Mark R. Sylvester and Jorge G. Tenreiro. The investigation was conducted by the Crypto Assets and Cyber Unit.
