Early stages of an investigation into Digital Currency Group (DCG) have begun by the Department of Justice (DOJ) which is focusing on financial transfers between the DCG and its subsidiary; Genesis Trading.
The Securities and Exchange Commission (SEC) are also launching their own investigation looking into the financial dealings of the DCG, with the DOJ requesting interviews from both companies.
Bloomberg broke the news this past weekend cited two individuals close to the matter stating that neither DCG and Genesis have “been accused of wrongdoing”.
Genesis has been embroiled in dealings that have left the crypto lender facing significant financial major losses, connecting to loans made to the now collapsed Three Arrows Capital. Genesis ultimately filed a claim against Three Arrows for $1.2bn, which the DCG assumed.
However, troubles would only mount further for the crypto firm in November during the aftermath of the FTX collapse. Genesis announced that it would suspend all withdrawals on its site, which had detrimental effects for companies such as Gemini who Genesis partnered with on its Earn program.
Last November, Gemini released a statement: “We are disappointed that the Earn program SLA will not be met, but we are encouraged by Genesis’ and its parent company Digital Currency Group’s commitment to doing everything in their power to fulfil their obligations to customers under the Earn program.”
Genesis customers have since had their money locked on the platform, with CoinDesk reporting that up to $1.8bn of customer funds were inaccessible. A further $900m is also believed to be owed to a group of GeminiEarn customers.
Genesis’ recent struggles resulted in a public dispute between its partner Gemini’s Co-Founder Cameron Winklevoss, and DCG Founder Barry Silbert, with the former accusing the latter of “bad faith stall tactics” arising from apparent unpaid money owed to Genesis. Silbert responded by tweeting that Genesis and Gemini customers were offered a proposal in late December.
As Gemini announced a 30% cut to its staff recently, a DCG spokesperson stated: “DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG.”