Court prevents DCG from altering Genesis ownership
In a recent legal development, a judge has ruled that Digital Currency Group is prohibited from making ownership changes within Genesis until DCG successfully exits bankruptcy.
This decision safeguards Genesis under DCG’s tax consolidated group, granting specific benefits to the crypto lender amidst its bankruptcy status.
The protective benefits will remain in force until the effective date of a Chapter 11 plan or if the bankruptcy transitions to a Chapter 7 case, resulting in business liquidation.
Genesis, arguing its case since late November, emphasized the necessity of DCG maintaining a stake above 80% to preserve the potential value of its holding company’s interest in the federal net operating loss (NOL) carryforwards of the DCG Group.
Net operating loss carryforwards serve as a tax advantage, enabling Genesis to deduct losses from future profits. Genesis, estimating over $700 million in NOLs generated, attributed these losses to the failure of digital asset hedge fund Three Arrows Capital to repay loans from Genesis Asia Pacific.
Filing for bankruptcy in January after FTX’s collapse, Genesis has been entangled in disputes with Gemini over their Earn program, suspended amid financial turmoil. The legal wrangling involves substantial amounts, with Gemini seeking $1.1 billion from 230,000 Earn customers and Genesis pursuing $689 million from Gemini.
Additionally, DCG, Genesis, and Gemini face a lawsuit from the New York Attorney General, alleging a “fraudulent scheme” related to the Earn product.
