Bankrupt crypto lender Genesis seeks approval to sell $1.6B of trust assets

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Bankrupt crypto lending firm Genesis Global Capital has requested a United States Bankruptcy Court for permission to liquidate shares in the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Classic Trust (ETCG), totaling approximately $1.6 billion.

In a recent court filing, Genesis emphasized the urgency of obtaining approval to sell the trust assets ahead of any potential fluctuations in the prices of the underlying assets, which are Bitcoin (BTC), Ether (ETH) and Ethereum Classic (ETC). Genesis stated that the aim is to maximize the funds available for distribution to creditors.

“The Debtors believe it would be beneficial to have the authority to sell and liquidate the Trust Assets to reduce any risk that fluctuations in price might have on the Debtors’ estates and to facilitate distributions to creditors.”

GBTC shares make up approximately 87% of Genesis’ total portfolio across the three trusts, with a value of $1.38 billion. 

Meanwhile, ETHE equates to roughly 10% of its total holdings, amounting to approximately $169 million, with ETHCG comprising about 3%, totaling $38 million.

Genesis trust assets. Source: Ctfassets

According to the filing, as of September 2023, GBTC held about 3.2% of all circulating Bitcoin. In December 2022, ETHE had approximately 2.5% of all circulating Ethereum, and ETCG held roughly 8.5% of all circulating Ethereum Classic.

Genesis highlighted that following approval from the United States Securities and Exchange Commission on Jan. 10, the recent conversion of GBTC to a spot Bitcoin exchange-traded fund now allows for the redemption of shares in cash through its redemption program.

However, it noted that the ETH trusts do not have a redemption program and, therefore, need written consent from the sponsor to sell or dispose of the shares. Genesis requested that the written approval be waived.

Related: BlackRock and ProShares Bitcoin ETFs overtake GBTC’s daily trading volume

Cointelegraph recently reported that since the GBTC conversion, there has been a significant exodus of investors selling their GBTC shares.

On Jan. 22, bankrupt cryptocurrency exchange FTX sold 22 million GBTC shares, valued at nearly $1 billion, completely liquidating all of its holdings.

However, Genesis declared that it intends to maximize the sale proceeds from the crypto assets.

“Both the Debtors and Gemini shall, on a good faith basis, use reasonable best efforts to maximize the market price of any Trust Assets or Initial GBTC Shares and the proceeds received from any sale thereof or any redemption thereof,” the filing stated.

Magazine: GBTC drops BTC stake by 21%, Celsius exits bankruptcy, and more: Hodler’s Digest, Jan. 28 – Feb. 3

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