There can be no reduction in Digital Currency Group’s interest in the insolvent corporation Genesis, according to a court order.
As a major step forward for the cryptocurrency sector, the court has ruled that Digital Currency Group (DCG) cannot reduce its stake in Genesis, its bankrupt company. A court document dated December 18 details this judgment, which is based on a finding by Judge Sean Lane. The order highlights the significance of DCG’s ownership in Genesis for tax advantages under U.S. law.
Judge Lane’s decision is critical because it confirms that Genesis and DCG are tax-consolidated entities under Section 1502 of the Tax Code. In order for the business to get certain tax breaks, this legal structure is required. The court filing states that DCG cannot change its connection with Genesis in a way that would impact their standing under the tax-consolidated group. Included in this category are modifications that have the potential to result in a “change in ownership,” as used in Section 382 of the Tax Code.
This ruling demonstrates the complex relationship between tax law and bankruptcy procedures. In order to take advantage of certain tax advantages, which might play a crucial role in Genesis’s financial reorganization, the company is keeping its present ownership structure.
In the middle of Genesis’s continuing bankruptcy procedures, the limitation on DCG’s ownership decrease has been lifted. The crypto lender went bankrupt during a rough patch in the cryptocurrency market, and DCG, its parent firm, was instrumental in the restructuring. Genesis still owes DCG $324.5 million, which the company agreed to pay up by April 2024 in a late-November settlement. Reducing litigation costs and giving money to pay creditor claims are two goals of this settlement, which is part of a larger approach to resolving financial commitments.
On the other hand, not everyone is happy with Genesis’s restructuring strategy. The Gemini Earn program, which was formerly linked to Genesis, has changed its terms such that participants may only get 61% of the value of their cryptocurrency holdings as of January 19, 2023. This aspect of the strategy reflects the more significant difficulties the crypto industry has encountered, which has led stakeholders to express their concerns.
Genesis and Gemini’s tense relationship serves as a background to these events. The two businesses, who were once partners on the Gemini Earn program, have been at odds for the last year. Legal disputes with regulatory agencies in the United States have emerged as a result of this disagreement, further complicating matters.
Genesis and Gemini’s legal troubles show how the cryptocurrency industry is being scrutinized more and more by regulators. The results of these firms’ bankruptcy and lawsuit proceedings may establish standards for the digital currency sector.
A pivotal moment in the history of the crypto lender has arrived with the court’s ruling prohibiting DCG from decreasing its interest in Genesis while the bankruptcy process is underway. It has an impact on both Genesis’s short-term financial restructuring and the overall market for digital currencies. Investors, regulators, and cryptocurrency fans will all be keenly watching the destiny of firms like Genesis and its affiliates as the sector continues to expand in the face of regulatory obstacles and market swings.
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