US Authorities Investigate Digital Currency Group (DCG)

Genesis Global had let go 30% of its workforce. DCG, the parent firm, decided to shut down its wealth section. The corporation has been experiencing a significant liquidity difficulty at Genesis since the FTX collapse.

Digital Currency Group (DCG), formerly known as HQ Digital, has shut down its wealth management section, a company representative said. The news was first reported by The Information. According to the DCG spokesperson’s email

A day after Digital Currency Group (DCG) announced that its wealth management division would be closing, US authorities opened an inquiry into the business’ internal financial transactions.

The parent company of Genesis, a cryptocurrency lender that is having serious liquidity issues, and Grayscale is DCG. According to people acquainted with the situation, federal officials in Brooklyn are currently looking into internal transfers between DCG and its troubled subsidiary Genesis. They are also investigating the details of the transfers that DCG disclosed to investors.

The U.S. Securities and Exchange Commission has entered the inquiry and has begun looking at the company’s internal papers. Both DCG and Barry Silbert have not yet been charged with any wrongdoing in the investigations, which are still in their early stages. In response to the news, the firm stated:

DCG has a strong commitment to honesty and has always operated legally. We are unaware of any Eastern District of New York investigations into DCG and have no reason to think there are any.

In a statement, Genesis, the subsidiary whose segment provides financing services, stated that it makes no comments on certain legal or regulatory issues. When Genesis receives inquiries, it stated, “Genesis maintains routine communication and collaborates with pertinent regulators and authorities.”

Both the SEC and the Eastern District of New York US Attorney’s Office declined to comment. Which intercompany behavior is under examination precisely is unknown.

DCG Genesis in Serious Trouble

The lending division of DCG subsidiary Genesis Global started abruptly suspending withdrawals last month due to a severe liquidity problem. Genesis has since been working to secure new funding for its lending division.

Gemini, a cryptocurrency exchange, has recently found itself in the crosshairs after Genesis chose to halt withdrawals. According to rumors, Genesis is home to a startling $1 billion in assets for the cryptocurrency exchange Genesis.

In an open letter to DCG CEO Barry Silbert, Gemini co-founder Cameron Winklevoss noted that 34,000 users of Gemini Earn products are awaiting the restoration of withdrawals. Additionally, he charged Silbert with using “bad faith stalling tactics” in relation to the frozen monies.

Barry Silbert, CEO of the Digital Currency Group, responded to this by emphasizing that DCG “has never missed an interest payment to Genesis and is current on all loans outstanding; next loan expiry is May 2023. On December 29, DCG sent a proposal to Genesis and your advisors; to date, it has not heard back.

Gemini Trust Co. co-founder Cameron Winklevoss and Silbert have been openly sparring.

In order to offer the program that allows consumers to earn significant returns on their bitcoin holdings while maintaining the suspension of withdrawals, Gemini had teamed with Genesis Global Capital. Since mid-November, users of the Earn product have not been able to withdraw money.

Winklevoss recently asserted that DCG and Genesis are “beyond commingled” and accused Silbert of obstructing efforts to find a solution.

Silbert responded by disputing several of Winklevoss’s claims in a Tweet. He said that DCG had sent a proposal to Genesis and Winklevoss’ advisors on December 29 but had not heard back. He continued, “DCG is current on all existing loans and has never missed an interest payment to Genesis.”

Is Genesis in Financial Collapse?

Genesis temporarily stopped funding new loans and making principal payments on November 16. Gemini, a cryptocurrency exchange that worked with Genesis on a yield plan, has also blocked withdrawals totaling $900 million from its Earn program as a result of Genesis’s conduct. Genesis has even appealed to investors for a $1 billion emergency loan in order to survive. It attempted to obtain money from renowned private equity firms including Apollo Global Management and top cryptocurrency exchange Binance.

Derar Islim, the company’s interim CEO, told clients that the company was attempting to find a solution. This was for its borrowing and lending arm, despite the fact that it will take more time to do so.

This happened after Gemini co-founder Cameron Winklevoss wrote an open letter. The letters outlines the debt they owe their consumers for the delay in starting withdrawals.

Investor flight from riskier assets as a result of rising interest rates and worries about an economic downturn. Furthermore, many have begun to question Genesis. Viability and longevity in the larger crypto sector in light of the recent bankruptcy filings and layoffs.