Bankrupt cryptocurrency lender Genesis seeks approval to sell $1.6 billion in trust assets
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Insolvent cryptocurrency lender Genesis has asked a U.S. bankruptcy court to approve the sale of approximately $1.6 billion worth of GBTC stock.
According to Genesis, the goal is to optimize the amount that can be paid to creditors.
Genesis Global Capital, an insolvent cryptocurrency lender, filed in a U.S. bankruptcy court to liquidate the assets of Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG). It has requested approval to sell $1.6 billion worth of stock.
Genesis emphasized that it must obtain permission to sell trust assets as quickly as possible through a court petition, regardless of future price movements of the underlying assets such as Bitcoin, Ethereum, and Ethereum Classic.
According to Genesis, the goal is to optimize the amount that can be paid to creditors.
“We believe that the debtors would benefit from having the power to sell and liquidate trust assets to reduce the risk that price fluctuations may pose to the debtor’s assets and to facilitate distributions to creditors.”
With a total value of $1.38 billion, GBTC shares make up approximately 87% of Genesis’ overall portfolio across the three trusts. ETHE accounts for nearly 10% of total holdings, or $169 million, while ETHCG accounts for about 3%, or $38 million.
As of September 2023, GBTC holds approximately 3.2% of all Bitcoin in circulation, according to the report. By December 2022, ETHE owned approximately 2.5% of all Ethereum in circulation, while ETCG controlled approximately 8.5% of all Ethereum Classic in circulation.
Genesis recently announced that GBTC was approved by the U.S. Securities and Exchange Commission on January 10th to convert into an in-kind Bitcoin exchange-traded fund, so shares can now be repurchased for cash through a repurchase program.
Nonetheless, it was pointed out that the ETH trust does not have a buyback program and that selling or disposing of shares requires official permission from the sponsor. Genesis requested that the written consent requirement be waived. After the GBTC conversion, the number of investors selling GBTC stocks increased significantly.
Bankrupt cryptocurrency exchange FTX sold 22 million shares of GBTC stock on January 22 for a total estimated value of about $1 billion, liquidating all of its holdings.
However, Genesis stated that its goal is to maximize profits from selling cryptocurrency assets. According to the document:
“Both the Obligor and Gemini shall use their best reasonable efforts in good faith to maximize the market price of the Trust Assets or the Initial GBTC Shares and the proceeds received from the sale or redemption.”
FTX is asking the court for permission to sell $175 million of its claims against the bankrupt company, Genesis Global Capital. FTX seeks to streamline the process by allowing full or partial sales of claims to take advantage of favorable market conditions, according to a request filed Feb. 4 in a Delaware court.
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