Several US regulators, including the Alabama Securities Commission, have started investigating Genesis Global Capital for possible violations of security laws.
According to a report by Barron’s, the crypto lender is being probed to know more about its connections with other crypto firms and retail investors. The investigation will also ascertain whether Genesis or the other participants breached security laws.
The report stated,
“It is part of a wide-ranging inquiry into the interconnectedness of crypto firms, Genesis’s connection to retail investors, and whether it or other industry participants might have violated securities laws.”
The director of the Alabama Securities Commission, Joseph Borg, stated that the agency and regulators of other states are also investigating to know if Genesis or the other participants enticed residents into investing in crypto-related securities without proper registrations. Borg did not call any names.
Genesis has been facing difficulties since the collapse of FTX. It has struggled to raise fresh capital or close a deal with its creditors. As a result, the lending arm of the Digital Currency Group (DCG) temporarily suspended redemptions and new loan originations.
The firm also noted that its other derivative unit had about $175 million in locked funds in its FTX trading account. As a result, its parent company, DCG, has offered to strengthen Genesis’ balance sheet with an equity infusion of $140 million.
Also, days after halting withdrawals, Genesis announced that it hired investment bank Moelis & Co. to explore how to shore up its crypto-lending business' liquidity and address clients' needs.
Finally, DCG made it clear that it is not on the verge of bankruptcy and will continue to be a leading builder in the industry committed to its long-term mission of accelerating the development of a better financial system.
