U.S. authorities are investigating the flow of funds between Digital Currency Group and its Genesis lending subsidiary, according to a report by Bloomberg.
Federal prosecutors in the Eastern District of New York are looking at transfers between DCG and Genesis and the Securities and Exchange Commission has also started a probe, Bloomberg reported, citing people familiar with the situation. The criminal investigation began prior to November’s collapse of the FTX crypto exchange.
The investigations are in their early stages and neither DCG nor any of its divisions have been accused of wrongdoing, Bloomberg said. It’s also unclear what specific activity is drawing scrutiny.
“DCG has a strong culture of integrity and has always conducted its business lawfully,” Bloomberg cited a company spokesperson as saying. “We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG.”
The SEC and U.S. Attorney’s Office for the Eastern District of New York declined to comment to Bloomberg. Attempts by The Block to contact DCG via a form on its website appeared to fail to process.
Last year’s crypto travails have taken their toll on DCG. Genesis had lent more than $2 billion to Three Arrows Capital, the crypto hedge fund that collapsed in July. More recently, the fallout from FTX’s November bankruptcy led Genesis to suspend redemptions.
DCG is also the parent company of CoinDesk, which competes with The Block to provide news on the crypto industry.
Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.
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