The US Department of Justice (DoJ) in collaboration with the office of the Eastern District of New York (ESDNY) has now broadened its scope into investigations of Barry Silbert’s crypto empire, the Digital Currency Group (DCG). The authorities are now investigating possible “inducements and fraud” on the part of the company and its subsidiaries.
According to a crypto Twitter commentator, the DoJ and ESDNY believe that there is more to the venture capital company’s case, as such is scrutinizing the information provided to the investors pertaining to the firm’s transactions.
UPDATE: DOJ/EDNY widening the scope of its probe of DCG.
**moving beyond inter company transfers/loans and deeper into ‘inducement and fraud’.
— Andrew (@AP_Abacus) January 23, 2023
Although investigations are not conclusive yet as it is still in the preliminary stages, some current and former employees of the bankrupt Genesis Global said they were ordered by DCG to convey some fraudulent financial statements to clients as per the tweet citing unnamed sources.
While it is still unknown and unclear which of DCG’s activities has brought it under the watch of the authorities, the US authorities early this year started investigations into the internal transactions of the company and its subsidiary for any wrongdoing.
DCG and its Subsidiary’s Financial Issues
Inevitably, cracks began to appear in Barry Silbert’s DCG after Genesis Global, its lending arm was plunged into heavy losses following the implosion of crypto hedge fund Three Arrows Capital (3AC) followed by the sudden collapse of FTX. Afterward, the platform was forced to pause customer lending withdrawal citing market turbulence. Currently, DCG has $575 million worth of intercompany loans due to Genesis in May 2023.
Just recently, CoinDesk, a subsidiary of DCG, has now considered sales to fund its future growth. Also, HQ Digital, one of its wealth management firms which once held $3.5 billion in assets under management, was closed at the beginning of the year.
A few days ago, Gemini Trust Company gave an update stating that the company intends to sue DCG and its CEO, Barry Silbert for the $900 million it owed to its customers. Should Barry and its company make a fair deal with Gemini’s customers who have their funds stuck in the Earn program, only then will Gemini withdraw from its potential lawsuit.