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Digital Currency Group  Internal Transfers Under Investigation

Author

John Asher

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Reading time

2 mins
Last update

Author

John Asher

Tags

Reading time

2 mins
Last update

Author

John Asher

Tags

Reading time

2 mins
Last update

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Bloomberg reported that U.S. authorities are currently investigating financial transfers between Barry Silbert’s crypto empire and it is believed that the inquiries are still in the early stages. The cryptocurrency market is on high alert as its possible contagion could have a negative impact on the entire market.

U.S. Authorities Investigating Digital Currency Group

According to a Bloomberg report, U.S. authorities are investigating the financial dealings of Digital Currency Group (DCG) and its subsidiary Genesis which offers crypto lending services. The crypto conglomerate is being scrutinized for its internal financial transfers. It is still unclear which exact intercompany activity that is drawing scrutiny.


The U.S. Department of Justice’s Eastern District of New York (EDNY) has requested interviews and documents from DCG and Genesis. At the same time, the U.S. Securities and Exchange Commission (SEC) is in a similarly early stage of its own inquiry and no wrongdoing has been alleged.

A spokesperson for DCG said that the company was unaware of any investigation and stated that DCG has a strong culture of integrity and has always conducted its business lawfully. On the other hand, Genesis refrain from commenting on any specific legal or regulatory concerns and stated that it maintains regular communication with regulatory bodies when it receives inquiries. 

Genesis In Financial Distress

On November 16, Genesis was forced to suspend redemptions and new loan originations after $175 million in assets were frozen on the failed crypto exchange, FTX. In order to strengthen the balance sheet, DCG provided Genesis with $140 million in equity.

Genesis owes $900 million to Gemini, a crypto exchange based in New York. The two companies worked together on a product called Gemini Earn, which allowed crypto investors to earn 8% interest on their crypto loans. 

Genesis has hired advisers and employed investment bank Moelis & Co. to explore options for its crypto-lending business as it seeks to address client needs which could include filing for Chapter 11 bankruptcy.

Grayscale, Another DCG Subsidiary, In The Hot Seat

Arcane Research has issued a warning about Digital Currency Group. Grayscale is another DCG company and an asset management firm that holds a large number of Bitcoin (BTC). Arcane Research stated that if Graycale’s parent company enters bankruptcy it could severely impact crypto markets.

On Jan. 4, most of Grayscale’s trust funds were trading at a discount, with Ethereum Classic Trust experiencing the largest discount at 77%, followed by Litecoin Trust at 65% and Bitcoin Cash Trust at 57%.

According to a source familiar with the matter, an investigation into Barry Silbert’s crypto empire had begun prior to recent issues at cryptocurrency exchange FTX, where Silbert is also involved.