March 29, 2024
Bitcoin News

Genesis Allowed to Sell $1.6 Billion Grayscale Bitcoin Trust Shares

In a significant development, a U.S. bankruptcy judge has given Genesis, a bankrupt crypto trading desk and lender, the green light to sell $1.6 billion worth of its Grayscale Bitcoin Trust (GBTC) shares. This decision, outlined in a court filing, is part of Genesis’s broader strategy to settle its outstanding debts with creditors.

The court ruling comes despite objections from Digital Currency Group (DCG), Genesis’s parent company, raising concerns about the premature nature of the sale concerning the overall bankruptcy plan. DCG contended that the proposed repayment plan favored a select group of creditors, leading to an imbalance. In a court filing, DCG stated, “DCG cannot support such a plan, and the court should not approve it.”

The primary bone of contention revolves around the fluctuating prices of digital assets, such as Bitcoin (BTC) and Ethereum (ETH), since Genesis filed for bankruptcy in January 2023. DCG argued that the rising values would result in some creditors receiving disproportionately more than others.

Despite DCG’s objections, the judge upheld the approval, allowing Genesis to proceed with selling GBTC shares alongside holdings in Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Classic Trust (ETCG).

Genesis plans to utilize the proceeds to repay customers and alleviate the financial burden associated with monthly trust agreement fees. This move aligns with Genesis’s broader liquidation strategy, which involves settlements with regulatory bodies to prioritize customer repayments. A comprehensive review of Genesis’s entire bankruptcy plan is scheduled for a court hearing on February 26.

Genesis encountered financial troubles in November 2022, exacerbated by substantial loans made to the bankrupt hedge fund Three Arrows Capital. The company filed for Chapter 11 bankruptcy protection in January 2023.

The judge’s approval is expected to put additional selling pressure on GBTC, which has witnessed a recent wave of liquidation following the U.S. Securities and Exchange Commission‘s approval for Grayscale to convert GBTC into a spot Bitcoin ETF. Despite persistent outflows, GBTC remains a dominant player in the space, boasting assets under management four times greater than BlackRock’s iShares Bitcoin Trust (IBIT). The latter recently reached a significant milestone, surpassing $5 billion in assets under management and doubling its fee from the initial 0.12% to 0.25%.

Image by jcomp on Freepik

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