Bankrupt Crypto Lender Genesis Seeks Nod to Sell $1.6B in Trust Assets

Key takeaways:

The insolvent crypto lending company Genesis has asked the US Bankruptcy Court to authorize selling its about $1.6 billion shares in the GBTC.

According to Genesis, optimizing the amount of money available to pay creditors is the goal.

The insolvent cryptocurrency lending company Genesis Global Capital has asked the US Bankruptcy Court for authorization to sell its about $1.6 billion worth of shares in the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG).

Genesis stressed the need to have permission to sell the trust assets as soon as possible in a court petition , regardless of any future changes in the prices of the underlying assets—Bitcoin, Ether, and Ethereum Classic. 

According to Genesis, optimizing the amount of money available to pay creditors is the goal.

“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.”

With a combined value of $1.38 billion, GBTC shares account for around 87% of Genesis’ entire portfolio across the three trusts. ETHE represents nearly 10% of its entire holdings, or $169 million, whereas ETHCG makes up approximately 3%, or $38 million.

The report states that as of September 2023, GBTC possessed roughly 3.2% of all Bitcoin in circulation. By December 2022, ETHE owned about 2.5% of all Ethereum in circulation, whereas ETCG controlled about 8.5% of all Ethereum Classic in circulation.

Genesis said that the recent conversion of GBTC to a spot Bitcoin exchange-traded fund, approved by the US Securities and Exchange Commission on January 10, now permits the redemption of shares in cash through its redemption program.

Nevertheless, it did point out that the ETH trusts lack a redemption program and that formal permission from the sponsor is required to sell or otherwise dispose of the shares. Genesis asked to have the requirement for written consent waived. Investors selling their GBTC shares have been in large numbers after the GBTC conversion. 

Bankrupt cryptocurrency exchange FTX sold 22 million GBTC shares on January 22 for a total estimated value of approximately $1 billion, clearing all of its holdings.

Genesis, however, stated that its goal is to maximize the money received from the sale of cryptocurrency assets. According to the filing:

“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,”

In order to sell its $175 million claim against the bankrupt company Genesis Global Capital, FTX is requesting permission from the court. FTX wants to streamline the process by permitting the sale of the claim in whole or in part to capitalize on advantageous market conditions, according to a request submitted on February 4 to a Delaware court. 

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