DGC Prohibited from Reducing its Stake in Genesis
A judge has recently ruled that Digital Currency Group (DCG) cannot make any ownership changes with Genesis until the latter emerges from bankruptcy. This decision keeps Genesis protected under DCG’s consolidated tax group, providing certain advantages to this bankrupt institutional lender.
Genesis, who filed a motion in November, argues that DCG’s stake in Genesis must remain above 80% to “preserve the potential value of Genesis’s interest in DCG’s carryover net operating losses (NOL)”.
Genesis claims to have accumulated over $700 million in NOLs over its operations. These net operating losses are significant as they can be used to reduce taxes on the company’s future profits.
If ownership of Genesis were to change, these benefits would no longer be applicable.
A Recap of Genesis’s Collapse
As a reminder, the company filed for bankruptcy in January after suspending client withdrawals following the collapse of FTX.
Since then, Genesis has been involved in several disputes with Gemini, another company in the cryptocurrency sector. These conflicts relate to Gemini’s Earn program. Genesis and Gemini had collaborated on this program, which aimed to offer Gemini clients a return on their deposits.
Due to Genesis’s financial issues, the Earn program was suspended in November. Gemini, on the other hand, has taken legal action to recover approximately $1.1 billion. This amount represents the funds belonging to 230,000 clients who had invested in the Earn program.
Lastly, Digital Currency Group (DCG), Genesis, Gemini, and Barry Silbert, the CEO of DCG, are also involved in a lawsuit filed by Letitia James, the Attorney General of New York. They are accused of participating in a “fraudulent scheme” related to the Earn product.
