Crypto Conglomerate DCG Under Investigation by US Authorities.

Digital Currency Group, better known as DCG, is currently under investigation by US authorities.

US prosecutors in New York, specifically the city of Brooklyn, are considering internal transfers between the multibillion-dollar cryptocurrency conglomerate and its crypto lending arm, Genesis Global Capital, according to a Bloomberg report.

The cryptocurrency lending firm has long been in the spotlight after heavy losses last year.

Based on anonymous sources close to the investigation, federal prosecutors are already conducting interviews of some staff members and requesting official documents.

Commenting on the matter, a DCG spokesman denied that the US venture capital firm was under investigation.

He said:

“DCG has a strong culture of integrity and has always done business lawfully. We have no knowledge or reason to believe that there is an investigation in the Eastern District of New York into DCG.

That said, Bloomberg’s report indicated that DCG may be in a two-way battle as the company is also under investigation by the Securities and Exchange Commission (SEC). However, to date there have been no allegations against DCG from either party, nor has any tangible information been disclosed by either US authority.

DCG and its relationship to Genesis

Genesis Global Capital’s troubles began in the middle of last year following the collapse of major hedge fund firm Three Arrows Capital. During this period, cryptocurrency lending services recorded severe losses of $1.2 billion.

A few months later, Genesis also suffered another blow after billion-dollar cryptocurrency exchange FTX filed for bankruptcy. The fall of FTX created a liquidity crisis for Genesis, which has led the company to suspend withdrawal and loan requests to date.

To allay public concerns, DCG has always distanced itself from Genesis’ constant words that the company was operating as a self-contained entity.

In a circular to its shareholders in November 2022, DCG CEO and founder Barry Silbert disclosed all existing loans between the two companies. It also said that all loans were made on “arms terms” and the repayment was structured according to the market interest rates prevailing at the time.

Will the Cryptocurrency Market Survive a Hit on DCG?

Digital Currency Group is one of the largest cryptocurrency conglomerates in the industry, with an AUM value of $50 billion as of September 2021.

In addition to Genesis Global Capital, the company also owns other subsidiaries, including Grayscale Investments, a leading digital asset manager holding over 600 BTC tokens, media publication CoinDesk, popular Bitcoin mining service Foundry, and Luno, an exchange cryptocurrencies with over 10 million customers.

If the current investigation into DCG by US authorities reveals information that causes negative sentiment towards the conglomerate and its subsidiaries, the knock-on effect could be quite catastrophic for the entire cryptocurrency market.

However, there is currently no indication that this is happening and investors can remain calm pending the release of more information on the investigation.

So far, the cryptocurrency market has recovered steadily following the crash of FTX in November. At the time of writing, market leader, Bitcoin has gained 2.4% over the past seven days and is currently trading at $16,937.52 according to data from Coinbase. TThe leading cryptocurrency holds the largest cryptocurrency supply, with a total market capitalization of $326.141 billion.

Trading BTC with a Market Cap of $326.141 Billion | Source: BTC chart on Tradingview.com

Featured image: Daily FX chart from Tradingview.com

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