Court bars Digital Currency Group from reducing Genesis ownership during bankruptcy
Digital Currency Group, the parent company of bankrupt crypto lender Genesis, has been barred from reducing ownership in the bankrupt firm until its bankruptcy proceedings conclude, according to a Dec. 18 court filing.
Judge Sean Lane ruled that DCG’s ownership of the distressed crypto lender was crucial for securing tax benefits. These benefits hinge on Genesis maintaining its association with DCG, ensuring it remains part of a tax-consolidated group outlined in Section 1502 of the Tax Code and related regulations.
According to the filing:
“DCG is barred from (i) taking any actions that would reasonably be expected to cause DCG and Holdco to no longer be part of the tax consolidated group of which DCG is the common parent (or any continuation of such group) as provided under Section 1502 of the Tax Code and regulations promulgated thereunder, (ii) taking any actions that would reasonably be expected to cause Holdco to undergo an “ownership change” within the meaning of section 382 of the Tax Code.”
This development is the latest in the ongoing conflict between Genesis and its parent company, DCG. In late November, DCG agreed to settle its outstanding $324.5 million loan by April 2024, aiming to resolve a lawsuit that might cost it $620 million payable to Genesis.
Genesis asserts that this repayment will provide benefits by reducing litigation expenses and furnishing funds to settle creditors impacted by the bankruptcy process.
Meanwhile, CryptoSlate reported that Genesis’s reorganization plan has attracted criticisms from Gemini Earn users, who might get just 61% of the value of their crypto holdings as of Jan. 19, 2023.
Genesis and Gemini once had an extensive business relationship that involved the Earn product. However, the firms have been at loggerheads during the past year and have faced legal actions from U.S. authorities.
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