The Digital Currency Group (DCG) is currently under investigation by US authorities.
According to a report by Bloomberg, US prosecutors in New York are investigating internal transfers between the billionaire crypto conglomerate and its crypto lending arm, Genesis Global Capital.
The crypto lending company has long been in the spotlight after suffering heavy losses over the past year.
According to anonymous sources close to the investigation, federal prosecutors are interviewing certain employees and requesting office records.
A DCG spokesman denied that the American venture capital firm was under investigation.
âDCG has always conducted its business fairly, and we have no knowledge or reason to believe that DCG is under investigation in the Eastern District of New York.
However, Bloomberg's report suggests that DCG could be locked in a duel as the company is also under investigation by the Securities and Exchange Commission (SEC). So far, however, no party has filed charges against DCG, and neither have the two US agencies released any concrete information.
DCG and its relationship to Genesis
Genesis Global Capital's troubles began in the middle of last year, after the collapse of Three Arrows Capital. During that period, the crypto lending servicer saw heavy losses of $1.2 billion.
A few months later, FTX, a crypto exchange, filed for bankruptcy. This left Genesis with a liquidity crisis that caused the company to suspend withdrawals and loan requests.
To allay public concerns, DCG has consistently distanced itself from Genesis, stating that the company operates as an autonomous entity.
In a November 2022 circular to shareholders, DCG CEO and founder Barry Silbert disclosed all outstanding loans between the two companies. He went on to say that all loans were made on an arm's length basis and repayment was structured according to market interest rates at the time.
Will the Crypto Market Survive an Attack on DCG?
Digital Currency Group is one of the largest crypto conglomerates in the industry with an AUM value of $50 billion as of September 2021.
Genesis Global Capital owns other subsidiaries including Grayscale Investments, media publication CoinDesk, Foundry and Luno. These subsidiaries hold a variety of cryptocurrencies and assets, including bitcoin.
Should the investigation into DCG uncover information that casts a negative light on the conglomerate and its subsidiaries, it could have devastating effects on the entire crypto market.
Investors can remain calm until further information about the investigation is released. However, there is currently no indication that this will happen.
Cryptocurrencies have steadily recovered since the FTX collapse in November. At the time of writing, Bitcoin is up 2.4% over the past seven days and is currently trading at $16,937.52, according to data from Coinbase. Bitcoin is the largest cryptocurrency asset with a total market cap of $326.141 billion.
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