Tanju Akbıyık 
‘DCG and Moro painted a deceptively rosy picture,’ wrote Sanjay Wadhwa, acting director of the SEC’s enforcement division.
The United States Securities and Exchange Commission (SEC) accused Digital Currency Group (DCG) and former Genesis CEO Soichoro ‘Michael’ Moro of misleading investors about Genesis’ financial condition following the Three Arrows Capital (3AC) collapse.
According to the 17 January filing, DCG and Moro agreed to pay a civil penalty totalling $38.5 million. Of this amount, $38 million belongs to DCG and $500,000 belongs to Moro.
Moro and DCG agreed to pay these penalties without admitting or denying any violation of the Securities Act of 1933.
This agreement is the latest development in Genesis’ legal process. Genesis had filed for bankruptcy protection in January 2022 due to the default of Three Arrows Capital (a former borrower of Genesis) in 2023.
3AC Collapse and Its Impact on Genesis
The collapse of Three Arrows Capital (3AC) has caused a major shakeup in the crypto sector, affecting all crypto firms with exposure to this now defunct crypto hedge fund.
3AC purchased approximately 10.9 million locked LUNA tokens for $570 million before the collapse of the Terra ecosystem in May 2022.
However, this $570 million investment was worth only $670 in June 2024, losing more than 99% of its value. This was a major blow to any company’s balance sheet, as well as severely impacting its ability to repay its debts. As of 16 June 2022, 3AC was unable to meet collateral completion calls from its creditors and was forced to liquidate certain positions in order to repay creditors.
A few days later, on 27 June, a court in the British Virgin Islands ordered the liquidation of 3AC’s assets. The liquidation decision was made on the same day that the former broker company Voyager Digital sent 3AC a notice of default due to its inability to repay a loan of 15,250 Bitcoin.
Following the liquidation of 3AC, former Genesis CEO Michael Moro told investors that Digital Currency Group and Genesis are working to mitigate losses from exposure to 3AC.
‘In June, we indicated that we had mitigated our losses related to a large counterparty that failed to meet a margin call,’ the former CEO wrote in a social media post in July 2022.
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