A bankruptcy judge has authorized Genesis to vend shares valued at approximately $1.6 billion.
Recently, a bankruptcy judge in the United States authorized Genesis, a lender and insolvent cryptocurrency trading center, to sell shares of Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG) for an estimated $1.6 billion. This decision is in accordance with Genesis’ plan to reimburse its creditors subsequent to its petition for Chapter 11 bankruptcy protection in January 2023.
The judge granted the request notwithstanding Digital Currency Group’s (DCG), the parent company of Genesis, objections concerning the timing of the transaction in light of the overall bankruptcy plan. DCG raised concerns regarding the potential for overpayment and the proposal’s apparent preference for a specific subset of creditors.
This objection emerged due to the upward trend in the values of digital assets such as Bitcoin (BTC) and Ethereum (ETH) subsequent to the organization’s declaration of bankruptcy. However, the judge ruled in favor of Genesis, noting that monthly trust agreement fees would be avoided and the proceeds from the transaction would be used to repay customers.
Genesis’s broader liquidation strategy, which also involves settlements with regulatory authorities to prioritize customer repayments, incorporates this decision. On February 26, the court will hold a further hearing regarding the sanction of Genesis’ comprehensive bankruptcy plan.
Genesis commenced experiencing financial difficulties in November 2022, predominantly attributable to substantial loans extended to the insolvent hedge fund Three Arrows Capital. The circumstances declined further when additional entities, including Alameda Research and FTX, encountered difficulties, culminating in Genesis’s declaration of Chapter 11 bankruptcy in January 2023.
Expectedly, the judge’s sanction of the transaction will increase selling pressure on GBTC, which has already undergone substantial outflows in recent weeks. Following the U.S. Securities and Exchange Commission’s approval of Grayscale’s conversion of GBTC to a spot Bitcoin ETF, investors liquidated their GBTC holdings, which increased this trend.
GBTC maintains its position as a prominent product in the cryptocurrency sector, notwithstanding the ongoing outflows. Its assets under administration are roughly four times greater than those of BlackRock’s iShares Bitcoin Trust (IBIT), which recently surpassed the $5 billion mark. This achievement is significant because it represents the doubling of IBIT’s fee from the initial 0.12% to 0.25%.
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