Crypto conglomerate Digital Currency Group, or DCG, is being investigated by the United States Department of Justice Eastern District of New York (EDNY) and the Securities and Exchange Commission (SEC), according to a Bloomberg report.
Authorities are digging into internal transfers between DCG and its subsidiary crypto lending firm Genesis Global Capital, the report said, citing people familiar with the matter. Prosecutors have requested interviews and documents from both companies, while the SEC is conducting a similar investigation in the early stages.
To date, no indictment has been brought against DCG, nor have any US authorities provided information on the case. According to a DCG spokesperson, the company is not aware of the investigation.
“DCG has a strong culture of integrity and has always conducted business lawfully. We have no knowledge or reason to believe that there is any investigation by the Eastern District of New York into DCG.
Genesis was one of the companies hit by a wave of contagion following the collapse of FTX in November. According to the company’s disclosure on November 10, it has $175 million locked in the FTX trading account. Genesis ended the withdrawal on November 16 due to liquidity problems, and has engaged investment bank Moelis & Company to help with the restructuring.
Related: Genesis tells client it needs more time on financial issues after Gemini demands action
Genesis owes $900 million to crypto exchange Gemini. They have operated a product called Gemini Earn that allows crypto investors to earn 8% interest on crypto loans. Gemini claims that DCG failed to reimburse Genesis, resulting in payment failures for Gemini’s clients.
Among DCG’s other subsidiaries are Grayscale Investments, media outlet CoinDesk, crypto exchange Luno and mining company Bitcoin Foundry. Cointelegraph reports that most of the Grayscale trusts are trading at a discount, with the Ethereum Classic Trust taking the hardest discount at 77% on January 4, followed by the Litecoin Trust at 65% and the Bitcoin Cash Trust at 57%.