Judge Rules: DCG Must Retain Genesis Ownership Until Bankruptcy Closure

• Genesis, the Insolvent Crypto Lender, Blocks DCG from Reducing Ownership
• Preserving Tax Benefits
• Using Carryforwards for Tax Savings
• Link to Three Arrows Capital's Failure

Genesis, the Insolvent Crypto Lender, Blocks DCG from Reducing Ownership

Genesis, a crypto lending firm facing bankruptcy, has successfully placed a temporary block on its parent company, Digital Currency Group (DCG), preventing it from selling or reducing its share in Genesis until the resolution of the ongoing Chapter 11 proceedings. This was revealed in a court order issued earlier this week.

Preserving Tax Benefits

Genesis's legal action is directed towards preserving certain tax benefits. These benefits can only be availed if Genesis remains a part of the tax-consolidated group, DCG, being the common parent in this case. The court document specifies that if DCG's ownership of Genesis drops below 80%, Genesis could lose benefits in the region of $700 million. These benefits are tied to "federal net operating loss carryforwards," as per a legal motion filed last month.

Using Carryforwards for Tax Savings

The carryforwards potentially offer Genesis the opportunity to reduce its federal income tax liabilities in the present and future years. As the motion suggests, this could potentially result in future tax savings that may improve the cash standing of the debtors, which would be beneficial for all involved parties and could aid a successful reorganization.

Link to Three Arrows Capital's Failure

The carryforwards of Genesis are directly associated with the failure of crypto hedge fund Three Arrows Capital in 2022, as indicated in the motion. Genesis filed for bankruptcy earlier this year, after a notably turbulent year for the crypto industry that saw multiple high-profile firms going under.

Edited by Jonathan Stoker