The U.S. Securities and Exchange Commission (SEC) has charged Digital Currency Group (DCG) and Soichiro “Michael” Moro, the former CEO of its now-defunct subsidiary Genesis Global Capital LLC, for misleading investors regarding Genesis’s financial health. To settle the charges, DCG and Moro have agreed to pay $38.5 million in civil penalties.
According to the SEC, the charges stem from events in mid-2022 when Genesis suffered significant financial distress after the collapse of one of its largest borrowers, Three Arrows Capital (3AC). The default resulted in Genesis incurring at least $1 billion in losses. Despite the financial turmoil, Genesis and DCG allegedly misrepresented the severity of the situation to investors.
Michael Moro, then the CEO of Genesis, was found to have made false or misleading statements on social media, assuring investors of Genesis’s financial stability. These statements, later amplified by other executives on social media platforms, gave investors the impression that the company remained financially secure despite the internal knowledge of substantial losses. The SEC concluded that these actions violated federal securities laws by misleading stakeholders.
The penalties include $28 million to be paid by DCG and $10.5 million by Moro. While neither party admitted nor denied the SEC’s findings, they both agreed to the financial settlement. Moro’s legal counsel stated that he was eager to move past the matter, emphasizing that he had aimed to provide accurate updates during a turbulent period in the cryptocurrency market.
A spokesperson for DCG expressed relief at the resolution of the issue, reiterating the company’s commitment to operating with integrity and transparency. However, the case highlights the broader challenges and risks in the cryptocurrency sector, particularly during market downturns.
The settlement serves as another reminder of the SEC’s intensified scrutiny of the crypto industry, with Chair Gary Gensler reiterating the agency’s mission to protect investors by holding firms accountable for misconduct. The case underscores the importance of transparency in navigating the volatile cryptocurrency market.
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