Soicholo “Michael” Moro, former CEO of Digital Currency Group (DCG) and its now-defunct Genesis subsidiary, settles securities fraud charges with the U.S. Securities and Exchange Commission (SEC) The companies agreed to pay a total of $38.5 million in civil penalties. .
The crypto venture capital firm will bear the brunt of the fine, paying a $30 million fine, and Moro will personally pay a $500,000 fine. In addition to the fines, both DCG and Moro also agreed to cease and desist orders. Neither DCG nor Moro have admitted any wrongdoing. Mr. Moro currently serves as Chief Strategy Officer at INX.
The charges stem from the bankruptcy of Genesis' second-largest borrower, crypto hedge fund Three Arrows Capital (3AC), in the summer of 2022, which left a $1 billion hole in Genesis' balance sheet. This stems from Genesis' response.
A spokesperson for DCG told CoinDesk: “The results of our investigation are limited and we follow an extensive investigative process focused on social media posts and communications conducted by our former operating subsidiary, Genesis Global Capital. I am pleased that it has been completed.” “DCG always strives to conduct its business with the highest integrity, and we believe our actions regarding Genesis are consistent with that approach.”
Regulators, including New York State Attorney General (NYAG) Letitia James, have accused DGC and its wholly-owned cryptocurrency trading subsidiary Genesis of working together to cover up a huge hole, with DCG absorbing Genesis' losses. He accused him of making false claims. What DCG allegedly did was issue Genesis a promissory note (essentially a debt instrument to create liquidity) promising to pay $1.1 billion over 10 years at 1% interest. It was. DCG denied that the promissory note was a fake.
“Especially in times of financial uncertainty and turmoil, it is vitally important that companies and their directors tell the truth to investors. The Commission finds that DCG and Moro fall short in this regard.” Sanjay Wadhwa, acting director of the SEC's Enforcement Division, said in a statement Friday. “Rather than being transparent about Genesis' financial condition and DCG's efforts to ensure Genesis' business continuity, DCG and Moro painted a misleading and rosy picture.”
The SEC and the Department of Justice reportedly began investigating DCG in 2023. Mr. James' civil suit against DCG is ongoing. She is seeking a $3 billion fine.
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