US Authorities Investigate DCG’s Crypto Empire Over Internal Transfers

A day after Digital Currency Group (DCG) announced shutting down its wealth management unit, US authorities launched an investigation into the internal financial dealings of the company.

DCG is the parent group of Grayscale as well as crypto lender Genesis which is facing major liquidity trouble. Federal authorities from Brooklyn are now investigating the internal transfers between DCG and its embattled subsidiary Genesis, said sources familiar with the matter. They are also looking into what information DCG provided to investors regarding the transfers.

Sources said that prosecutors have started looking into the internal documents of the company while the U.S. Securities and Exchange Commission has also joined the investigation. The probes are still in the early phase and neither DCG nor Barry Silbert has been accused of any wrongdoing. Commenting on the development, the company said:

“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.”

Furthermore, DCG’s embattled subsidiary said that they won’t be commenting on any specific legal issues or regulatory matters. “Genesis maintains regular dialogue and cooperates with relevant regulators and authorities when it receives inquiries,” it added.

Regulators like the U.S. SEC and Attorney’s Office for the Eastern District of New York haven’t commented anything yet.

Genesis Drags DCG Into Trouble

Crypto lender Genesis came under major trouble following the collapse of crypto exchange FTX. Following liquidity issues, Genesis suspended all withdrawals last month dragging parent group DCG into the matter.

DCG, however, has maintained a distance stating Genesis’s troubles are their own and that it operates as an independent company. In its letter to shareholders in November 2021, DCG founder Barry Silbert stated that he received about $575 million in loans from Genesis Global Capital that are due in May 2023.

However, Silbert added that these intercompany loans were part of ordinary business and “always structured on an arm’s length basis and priced at prevailing market interest rates.”

But crypto exchange Gemini has lashed out at Digital Currency Group since it has more than $900 million in deposits from its earn products with Genesis. Gemini co-founder Cameron Winklevoss accused Silbert of stalling efforts to resolve the issue. He also added that both DCG and Genesis are “beyond commingled”.