Court Frees Genesis to Sell GBTC Shares Worth $1.3B to Compensate Clients

Genesis Global obtained bankruptcy court approval on Wednesday to sell its Grayscale Bitcoin Trust (GBTC) shares.

The bankrupt crypto lender can now sell its 35m GBTC shares worth over $1.3b as part of efforts to reimburse customers. In a Feb. 14 hearing conducted via Zoom, Judge Sean Lane signed off on an order permitting the debtors to sell the shares as desired. No timeline was specified.

Judge Lane’s approval allows the debtors to convert the shares into either bitcoin or cash.

Genesis also got the green light to call the shots on how to sell off the assets and to team up with a broker for the sales process.

BREAKING

🔹 Genesis got court approval to sell $1.3B worth of GBTC shares. It can convert GBTC into bitcoin/cash.
🔸 Genesis also plans to sell shares in Ethereum Trusts worth $200M+. Additionally, it agreed to pay a $21M SEC fine for a lawsuit related to Gemini Earn.

— House of Chimera (@HouseofChimera) February 15, 2024

Genesis’ Grayscale Shares Valued at $1.6B

In a Feb. 2 filing, Genesis indicated intentions to sell Grayscale Ethereum Trust and Grayscale Ethereum Classic Trust shares, along with GBTC shares, totaling $1.6b.

Genesis initially pledged the GBTC shares as collateral for the Gemini Earn program. Gemini saw the filing as a big step forward, especially after GBTC got approved as an exchange-traded product (ETP) on Jan. 10.

However, Genesis faced obstacles in its plans. The lender’s parent firm, Digital Currency Group (DCG), and Grayscale opposed its plan to liquidate these assets.

Pushback on Asset Liquidation Plans

DCG argued that Genesis’ reasons for selling the assets lacked merit.

“Given the uncertainty around the debtors’ Amended Plan and when distributions to creditors might actually occur, there appears to be no immediate need for the relief requested by the Debtors,” DCG lawyers said.

However, Genesis lawyer Sean O’Neal noted that they were the only ones opposing. Both entities stood to profit from delaying the sale or redemption of the Trust Assets due to their above-market management fees, he said.

“Because of these above market fees, the debtors’ interests in the assets underlying the Trusts (e.g., BTC, ETHE) are losing value,” O’Neal said.

“Given DCG’s past and current conduct, the debtors are concerned that unless the court approves the motion, DCG will make every effort to cause Grayscale to not approve of redemptions and transfers, thereby violating fundamental principles of bankruptcy law to the detriment of the debtors’ estates.”

As of press time, GBTC traded around $46.19 a share.