Digital Currency Group (DCG) is facing scrutiny over financial transactions involving its subsidiary, Genesis Global Capital.
According to Bloomberg, New York Attorney General Letitia James is conducting an investigation into the matter, with federal prosecutors and the U.S. Securities and Exchange Commission also seeking interviews with potential witnesses related to Genesis and DCG.
The investigation centers on loans and other transactions carried out between the two companies. DCG disclosed that it received approximately $575 million in loans from Genesis last year.
Authorities are also examining a letter from DCG’s founder and CEO, Barry Silbert, in which he mentioned a $1.1 billion promissory note resulting from DCG assuming liabilities connected to the collapse of the hedge fund Three Arrows Capital (3AC).
The disclosure of the promissory note to investors has become a significant point of interest for investigators. DCG is being represented in the case by former acting U.S. Attorney Seth DuCharme.
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It is uncertain whether the investigations will lead to formal complaints. DCG stated that it is cooperating with regulatory bodies and investigative agencies as required.
The company emphasized that transactions between Genesis and DCG were conducted on an arm’s length basis and priced at prevailing market interest rates.
In January, Genesis filed for Chapter 11 bankruptcy due to liquidity issues amid the bear market and the collapse of other prominent crypto firms, including 3AC and FTX, a crypto exchange.
The filing estimated liabilities ranging from $1 billion to $10 billion, with corresponding assets.
Genesis is the largest unsecured creditor of FTX and its affiliates, with $226 million owed. However, the companies recently reached an agreement to settle the dispute.
DCG’s venture capital portfolio encompasses Grayscale, Genesis, CoinDesk, and around 200 other crypto-related companies.
Additionally, the company holds equity in other firms such as the crypto exchange Luno and advisory firm Foundry.
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