US authorities are investigating Digital Currency Group (DCG), the parent company of Grayscale Bitcoin Trust and crypto lending platform Genesis Trading, Bloomberg said in a report. Quoting unnamed sources, the report said the Department of Justice (DoJ) and Securities Exchange Commission (SEC) is probing transfers between DCG and Galaxy.
The investigation seems to be in the early stages and neither DCG nor Genesis has been accused of any wrongdoing. The DoJ has reportedly sought some papers and asked for interviews with some key functionaries in the two companies.
Genesis Trading took a hit of $1.2 billion due to its exposure to hedge fund Three Arrows, which imploded in June following the collapse of Tera-Luna. In November, Genesis suspended withdrawals, before cutting down its headcount by half. The suspension of withdrawals has impacted several other crypto firms, more importantly, crypto exchange Gemini. The collapse of FTX has furthered hit Genesis’s books.
Creditors have claimed over $1.8 billion from Genesis as of early December. Genesis has appointed advisers to suggest ways to come out of its current crisis and a possibility of a Chapter 11 bankruptcy filing can’t be ruled out.
Another subsidiary of DCG, Grayscale is also facing difficulties due to the ongoing crypto winter. Grayscale Bitcoin Trust (GBTC) shares dropped 50% of the bitcoin price last month, after selling over 40% discounts for several months.
The Bloomberg report quoted a Genesis spokesperson as saying that it maintains regular dialogue with the regulators, without commenting on the investigation.
