Digital Currency Group (DCG) is now facing investigations from US authorities over its internal financial transactions, Bloomberg reported, citing people familiar with the matter.
According to the report, federal prosecutors were investigating transfers between the crypto conglomerate DCG and its subsidiary, Genesis. Prosecutors are investigating whether investors were informed about the transactions between both entities and if there was any wrongdoing.
Prosecutors have begun requesting information from the parties involved. The financial regulator, the Securities and Exchange Commission (SEC), is also investigating the crypto firm. The report added that the investigations are still preliminary, and none of the firms have been accused of wrongdoing.
DCG has been in the eye of a storm since FTX collapsed in November. Following the exchange implosion, Genesis halted client withdrawals citing market conditions, which raised questions about its financial health.
Meanwhile, the transactions between both firms have generated several controversies despite CEO Barry Silbert’s statement that they were made for business purposes alone. In a November letter, DCG said it got a $575 million loan from Genesis and a $1.1 billion promissory note due in June 2032.
DCG Denies Knowledge of Any Investigations
Meanwhile, the company has denied having any knowledge of the investigations. A spokesperson for DCG said the firm has always conducted its business lawfully and has no knowledge that it was under any inquiry from the authorities.
On the other hand, Genesis declined to comment on if it was under any investigation. Instead, the firm said it cooperates with the authorities when it receives inquiries.
The investigations further compound the woes for crypto conglomerate DCG. Earlier in the week, Gemini co-founder Cameron Winklevoss gave a January 8 ultimatum for the firm to resolve the issues. He lambasted Silbert for employing delaying tactics and claimed DCG and Genesis were beyond commingled.
All of this grey financial situation has generated fear that Grayscale, another company owned by DCG, might liquidate some of its trusts to cover Genesis’ creditors. Several analysts have opined that the liquidation would exert more sell pressure on the crypto market.
Apart from that, reports have revealed that Genesis is considering filing for bankruptcy and has laid off 30% of its staff. The firm will shutter its wealth management division on January 31. Genesis CEO Derar Islim said the firm would require more time to solve its financial situation.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.