Bankrupt Crypto Lender Genesis Secures Tax Benefits Amid Chapter 11 Proceedings

According to CoinDesk, bankrupt crypto lender Genesis has successfully blocked its parent company, Digital Currency Group (DCG), from selling or reducing ownership in the company until the conclusion of Chapter 11 proceedings. A court order issued on Monday revealed that Genesis sought to secure certain tax benefits by barring any changes to ownership. These benefits are only applicable if Genesis remains part of the tax-consolidated group with DCG as the common parent. If DCG's ownership of the lender falls below 80%, Genesis could lose benefits on approximately $700 million worth of federal net operating loss carryforwards, as stated in a motion from November. The carryforwards can be used to decrease Genesis' federal income tax liability in the current and future years, potentially resulting in future tax savings that would enhance the debtor's cash position for the benefit of all parties involved and contribute to a successful reorganization. The motion also revealed that Genesis' carryforwards are directly linked to the failure of the crypto hedge fund Three Arrows Capital in 2022. Genesis filed for bankruptcy in January, following a tumultuous year for the crypto industry, which saw several high-profile firms collapse one after another.