Following the collapse of FTX, the bankrupt cryptocurrency firm Genesis has requested the New York bankruptcy court to prevent any ownership changes that could jeopardize approximately $700 million in tax advantages related to business losses. This move aims to secure tax benefits by maintaining its status within the tax-consolidated group of its parent company Digital Currency Group (DCG).
Genesis has won a legal battle to prevent DCG from selling or reducing its stake in the company until the Chapter 11 proceedings are concluded. A court decision revealed that Genesis took significant steps to protect certain tax benefits, which are contingent on remaining part of DCG’s tax-consolidated group.
If DCG’s stake in the lending firm falls below 80%, Genesis could lose its “federal net operating loss carryforwards” worth nearly $700 million. These carryforwards could reduce Genesis’s federal income tax obligations in current and future years, benefiting all parties involved and aiding in a successful restructuring.
The court filing suggests that these carryforwards are directly linked to the downfall of crypto hedge fund Three Arrows Capital in 2022. Genesis filed for bankruptcy in January after a tumultuous year for crypto and the successive collapse of several high-profile firms.
Meanwhile, Bitcoin prices briefly surged above $43,000 but failed to maintain that level, trading around $42,637 at the time of writing. Altcoins experienced a sudden 10% increase in prices after news about Do Kwon, with Binance listings showing significant gains for DATA, AUCTION, and SEI.
