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US Authorities Investigate DCG’s Crypto Empire over Internal Transfers

The US authorities opened an investigation into the financial transactions of Digital Currency Group (DCG), a day after it announced the closure of its wealth management unit.
DCG is Grayscale’s parent company, as well as the crypto lender Genesis. Genesis is in serious liquidity trouble. Sources familiar with the matter say that federal authorities in Brooklyn are currently investigating internal transfers between DCG’s troubled subsidiary Genesis and DCG. They are also investigating the information DCG provided investors about the transfers.

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Sources claim that prosecutors are now looking into internal documents at the company, while the U.S. Securities and Exchange Commission is also involved in the investigation. The investigations are still in their early stages and neither Barry Silbert nor DCG have been accused of any wrongdoing. The company commented on the developments by saying:
“DCG has a strong culture and integrity and has always operated its business lawfully.” We don’t know of any Eastern District of New York investigation into DCG.
DCG’s troubled subsidiary stated that they will not comment on specific legal issues or regulatory matters. It added that Genesis maintains a regular dialogue with regulators and authorities and cooperates with them when they receive inquiries.
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The U.S. SEC, Attorney’s Office Eastern District of New York and other regulators have not commented on the matter yet.
Genesis Drags DCG Into Trouble
After the collapse of crypto exchange FTX, Genesis, a crypto lender, was in serious trouble. Genesis pulled the plug on withdrawals last month due to liquidity issues.

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DCG has maintained a distance, stating that Genesis’s problems are their own and that the company is an independent entity. In a November 2021 letter to shareholders, Barry Silbert, founder of DCG, stated that he had received loans from Genesis Global Capital totaling $575 million that were due in May 2023.
Silbert said that intercompany loans were an ordinary part of business and that they were “always structured on an arms-length basis and priced at the prevailing market interest rate.”
Digital Currency Group has been attacked by crypto exchange Gemini, which has over $900 million in deposits due to its earn products with Genesis. Cameron Winklevoss, co-founder of Gemini, accused Silbert for stalling efforts in resolving the issue. He also stated that Genesis and DCG are “beyond combinated”.

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