Former Genesis CEO Michael Moro has been sanctioned by the U.S. Securities and Exchange Commission as part of a 2023 lawsuit against its parent company, Digital Currency Group

Digital Currency Group, a crypto-focused investment conglomerate, has reached a $38 million settlement agreement with the SEC for misleading investors about risks tied to the now-defunct hedge fund Three Arrows Capital.

Court documents filed on Friday, Jan. 17, allege that DCG misled investors through Genesis Global Capital, LLC, its crypto lending subsidiary.

The SEC claimed that GGC and DCG colluded on a $1.1 billion promissory note to artificially inflate the lender’s balance sheet. Genesis investors were unaware of the note in 2022, which the SEC said violated federal regulations.

Executing the Note to create positive equity on the balance sheet without disclosing the terms of the Note to GGC investors allowed Digital Currency Group and GGC to obfuscate how and whether Digital Currency Group had stepped in to fix the problems caused by the TAC default.

SEC court filing

Former Genesis CEO Michael Moro agreed to pay $500,000 in civil penalties to settle the charges. Defendants were also ordered to cease and desist from further violations of federal rules.

Genesis filed for bankruptcy in 2023, disclosing up to $10 billion in liabilities and over 100,000 creditors. Top creditors like Gemini and VanEck were owed a combined $3 billion, according to court filings.

Regulators have been pursuing DCG and its affiliates since 2023 due to widespread industry failures in 2022. New York’s Attorney General accused DCG, Genesis, and crypto exchange Gemini of defrauding 29,000 investors of $1 billion through Gemini’s Earn Program. Genesis had previously agreed to a $21 million SEC settlement in the Gemini Earn lawsuit.