Bankrupt Crypto Lender Genesis Global Seeks Approval to Sell $1.6B of Trust Assets

Bankrupt Crypto Lender Genesis Global Seeks Approval to Sell $1.6B of Trust Assets

UTC by Steve Muchoki · 3 min read
Bankrupt Crypto Lender Genesis Global Seeks Approval to Sell $1.6B of Trust Assets
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The motion to liquidate Genesis assets at Grayscale Investment has been supported by Gemini that is seeking to repay the affected Earn Program customers.

In the good faith of winding down the bankruptcy proceedings, Digital Currency Group-backed Genesis Global Capital LLC has filed a motion requesting an entry of an order that authorizes the sale of the estate shares at Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG) worth approximately $1.6 billion. According to the court filing directed to the United States bankruptcy court of the Southern District of New York on February 2, the debtors including Genesis Asia Pacific held 35,939, 233 GBTC shares worth approximately $1.38 billion.

Additionally, the debtors held 8,717,520 ETHE shares worth about $169.9 million and 2,970,892 ETCG shares valued at around $38 million. According to a court filing, the debtors have requested the authority to sell and liquidate the trust assets in a bid to reduce associated volatility risks. Nevertheless, the motion indicated that the debtors are open to in-kind compensation and cash settlement can be used where possible.

“The Committee, the Ad Hoc Group, and Gemini have informed the debtors that they are supportive of this motion, with the caveat that Gemini’s support is conditioned on the debtor’s stated intention that this motion be neutral with respect to the parties’ dispute pertaining to the initial GBTC shares and the additional GBTC shares,” the motion noted.

Troubles that Genesis Global Faces

The troubles facing Genesis Global escalated after the implosion of FTX and Alameda Research in late 2022. While the company attempted to solve the issue with the creditors outside the court, a resolution was not reached, which resulted in the debtor filing for Chapter 11 bankruptcy protection in the United States in January last year. Worth noting that both Genesis Global and Gemini Trust Company were charged by the United States Securities and Exchange Commission (SEC) for offering and selling unregistered securities. Nonetheless, Genesis Global agreed to settle on a $21 million fine with the US SEC to avoid further financial implications of the lawsuit.

Market Implication

The winding down of the Genesi Global bankruptcy proceedings is a notable welcome to the cryptocurrency industry, as the distressed Gemini Earn investors have been anxiously waiting for months. However, the notable liquidation of associated assets held by Grayscale funds is expected to weigh heavily on the general crypto bullish outlook. Furthermore, Grayscale’s GBTC has been offloading a significant amount of Bitcoins since the approval of spot Bitcoin ETFs by the US SEC last month.

Nevertheless, most of the GBTC investors liquidating the shares have not necessarily been exiting the market but have been fleeing to other spot Bitcoin ETFs with lower fees and higher liquidity. Meanwhile, Bitcoin price faces a potential reversal pattern towards the support level of around $35k, which could pave the way for the much-anticipated altseason.

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