Key Takeaways
- Reportedly, federal prosecutors and the SEC are actively seeking interviews with potential witnesses associated with Genesis and DCG.
- Officials are closely examining a letter from DCG’s CEO, Barry Silbert, where he mentioned a $1.1 billion promissory note
The New York Attorney General’s office has initiated an investigation into Digital Currency Group (DCG), a renowned blockchain investment firm founded by Barry Silbert. As part of the probe, the firm’s subsidiary, Genesis Global Capital, is also under scrutiny by Federal Prosecutors in Brooklyn and the Securities and Exchange Commission (SEC).
While there has been no official confirmation of the investigation from NYAG or DCG, reports suggest that federal prosecutors and the SEC are actively seeking interviews with potential witnesses associated with both Genesis and DCG.
The focus of the investigation revolves around loans and other transactions conducted between the companies. DCG made headlines last year when it disclosed receiving approximately $575 million in loans from Genesis.
Moreover, officials are closely examining a letter from DCG’s CEO, Barry Silbert, where he mentioned a $1.1 billion promissory note. Silbert stated that the note resulted from DCG taking on liabilities from Genesis linked to the collapse of hedge fund Three Arrows Capital (3AC).
The disclosure of the promissory note to investors has emerged as a central point of concern in the ongoing investigation. The manner in which this transaction was presented and communicated to shareholders is being thoroughly scrutinized by the authorities.
To represent its interests, DCG has enlisted the services of former acting U.S. Attorney Seth DuCharme, who is now at the forefront of the legal battle.
In a separate development earlier this year, Genesis filed for Chapter 11 bankruptcy in the Southern District of New York. The filing revealed estimated liabilities of $1 billion to $10 billion and corresponding assets in the same range.
The investigation deepened in January when DCG came under fire for internal transfers conducted between the firm and Genesis. Among the transactions under investigation are the $575 million in loans received by DCG from Genesis Global Capital and the $1.1 billion promissory note issued to the subsidiary after assuming liabilities from Genesis.
In a recent development, bankrupt cryptocurrency exchange FTX and Genesis have reached an agreement in principle to resolve claims made by FTX in its bankruptcy case. Genesis, the largest unsecured creditor of FTX and its affiliates, was owed a staggering $226 million.
