SEC Fines Digital Currency Group

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The US Securities and Exchange Commission (SEC) has officially begun a legal process against Digital Currency Group (DCG), a venture capital firm, for alleged negligent actions related to a lending program offered by its subsidiary, Genesis Global Capital (GGC).

The allegations accuse DCG of misleading investors about GGC’s financial stability during a crucial period in mid-2022.

According to the SEC’s findings, DCG, which was started in Stamford, Connecticut in 2015, has never registered with the commission or any securities. In 2017, GGC, a company wholly-owned by DCG, launched a program that allowed retail investors to lend their Bitcoin and other cryptocurrencies in exchange for interest payments.

These assets were then lent to institutional borrowers. However, in June 2022, GGC faced a major crisis when one of its largest borrowers, hedge fund Three Arrows Capital (TAC), defaulted on a $2.4 billion loan. This default had significant implications and resulted in GGC having insufficient collateral to cover the loan amount.