Bankrupt crypto financier Genesis has blocked its parent company, Digital Currency Group (DCG), from selling or reducing its ownership until the Chapter 11 bankruptcy process is completed. succeeded in doing so.

According to a court order issued Dec. 18, Genesis appears to have sought to secure certain tax benefits by prohibiting changes in ownership. This incentive will only apply if Genesis remains part of a consolidated group with DCG as its common parent.

If DCG’s ownership falls below 80%, Genesis will no longer be able to benefit from the federal tax loss carryforward deduction, which is worth approximately $700 million (approximately 98 billion yen, equivalent to 140 yen per dollar). He was seeking an injunction.

According to the complaint, this credit carryforward can be used to reduce Genesis’ current and future federal income tax liability, and “results in future tax savings and strengthens the debtor’s cash position, thereby benefiting all interested parties.” This will benefit all parties concerned and contribute to the success of the reorganization.”

The complaint alleges that Genesis’ losses are closely related to the July 2022 bankruptcy of Three Arrows Capital, a cryptocurrency hedge fund. Genesis filed for bankruptcy in January 2023, after 2022 was a tumultuous year for crypto assets, with high-profile companies going bankrupt one after another.

｜Translation: CoinDesk JAPAN
｜Edited by: Toshihiko Inoue
｜Image: Richard Mortel/Flickr
｜Original text: DCG Can’t Sell or Reduce Ownership of Genesis Until Bankruptcy Proceedings Close, Judge Rules