The US Securities and Exchange Commission has imposed sanctions on former Genesis CEO Michael Morrow as part of a lawsuit filed in 2023 against its parent company, the cryptocurrency group.

Cryptocurrency Group, an investment group focused on cryptocurrencies, has reached a $38 million settlement agreement with the Securities and Exchange Commission for misleading investors about risks associated with the now-defunct hedge fund Three Arrows Capital.

Court documents filed on Friday, January 17 Allegedly DCG misled investors through Genesis Global Capital, LLC, its cryptocurrency lending company.

The SEC alleged 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 2022 memo, 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's investors allowed Digitalcurrency Group and GGC to obscure how and whether Digitalcurrency Group intervened to fix the problems caused by TAC's default.

SEC court filing

Michael Morrow, former CEO of Genesis, agreed to pay $500,000 in civil penalties to settle the charges. The defendants were also ordered to cease and desist from committing further violations of federal rules.

Genesis declared bankruptcy in 2023, revealing liabilities amounting to $10 billion and more than 100,000 creditors. Senior creditors like Gemini and Van Eck were owed a combined $3 billion, according to court filings.

Regulators have been pursuing DCG and its affiliates since 2023 for widespread industry failures in 2022. New York Attorney General accused DCG, Genesis, and cryptocurrency exchange Gemini defrauded 29,000 investors out of $1 billion through Gemini's Earn program. Genesis was previously Agreed to a $21 million settlement from the Securities and Exchange Commission in the Gemini Earn lawsuit.