Multiple U.S. state regulators are investigating crypto trading firm Genesis Global Capital for potential securities violations, Barron’s reported Friday.
Alabama Securities Commission Director Joseph Borg said agencies in several other states are involved in the investigations.
Regulators are investigating whether Genesis influenced residents to invest in crypto securities through its platform without having the right registrations, Borg said, adding that other companies were also being investigated. He did not name them.
Alabama was one of several states last year to ask BlockFi why it should be allowed to continue selling interest-bearing accounts to state residents, asserting that the product was not registered with the state regulator.
BlockFi agreed to pay $100 million to the Securities and Exchange Commission (SEC) and 32 states in a February settlement. Under the deal, the company agreed to stop selling its interest-bearing accounts in the U.S. and sell a new one tailored to the Securities Act of 1933. In an unrelated note, BlockFi filed for bankruptcy Monday.
Spokespeople from the Alabama Securities Commission and Genesis have not returned requests for comment on the matter.
Genesis is one of many companies swept up in the downfall of crypto trading platform FTX, which went from billions to bankrupt this month under the watch of founder and then-CEO Sam Bankman-Fried.
Genesis is reportedly exploring its options, including bankruptcy, because its exposure to FTX. Genesis also struggled in its exposure to defunct crypto hedge fund Three Arrows Capital, which collapsed this year, affecting the balance sheets of several crypto companies, including Voyager and Celsius.
Genesis' institutional lending unit suspended redemptions and new loan originations Nov. 16.
The company tweeted roughly a week earlier that it had $175 million of funds locked in FTX, leading its parent company Digital Currency Group to infuse it with $140 million, according to CoinDesk.
FTX’s struggles
Regulators in the Bahamas, meanwhile, are keeping a close eye on FTX, which is headquartered on the island, and former CEO Bankman-Fried, who lives there.
Bahamian Attorney General Ryan Pinder released a taped 23-minute statement Sunday, praising Bahamian regulators on their response to FTX’s downfall. The exchange is the subject of "an active and ongoing investigation" said Pinder, who is also a senator and the minister of legal affairs.
"We are in the early stages of an active and ongoing investigation," Pinder said, calling it “a very complex investigation" involving civil and criminal authorities.
The Bahamas Securities Commission, Financial Intelligence Unit and the Royal Bahamas Police Force’s Financial Crimes Unit will "continue to investigate the facts and circumstances regarding FTX's insolvency crisis, and any potential violations of Bahamian law," Pinder said.
