July 15, 2024

Genesis Global Receives Court Approval to Sell $1.6 Billion in Grayscale Cryptocurrency Trust Shares

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In a pivotal development for the beleaguered crypto lender, Genesis Global, a U.S. Bankruptcy Judge Sean Lane granted approval on Wednesday to sell approximately $1.6 billion in Grayscale cryptocurrency trust shares as part of the company’s efforts to settle outstanding debts to creditors.

The court hearing, held in White Plains, New York, saw Genesis Global seeking permission to monetize its holdings, including shares in Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Grayscale Ethereum Classic Trust. The decision allows Genesis to proceed with the sale of about 35 million shares in the Bitcoin Trust, valued at around $1.38 billion, and Ethereum Trust shares worth approximately $207 million.

The approval comes in the wake of Genesis’s bankruptcy filing in January 2023, just one week after the U.S. Securities and Exchange Commission (SEC) sued the company for allegedly selling illegal securities. The crypto lender also halted customer withdrawals from its Gemini Earn crypto lending program two months before filing for bankruptcy.

Genesis aims to utilize the funds generated from the sale to repay its creditors and avoid incurring monthly fees of $1.9 million associated with its trust agreements.

Despite objections from Digital Currency Group (DCG), Genesis’s parent company, Judge Lane overruled concerns that the sale might be premature. DCG had cautioned that the sale’s timing was contingent on Genesis gaining approval for its overall bankruptcy plan. Genesis is pursuing a liquidation strategy that involves shutting down the company and reimbursing customers in either cash or cryptocurrency, depending on their deposited assets.

The bankruptcy plan has faced scrutiny, with DCG arguing that it overpays customers and creditors, potentially hindering DCG’s recovery as an equity owner. DCG contends that U.S. bankruptcy law requires Genesis to value customers’ crypto holdings based on their value at the time of the bankruptcy filing in January 2023. The proposed plan, according to DCG, allows “additional payouts” to adjust for the increased value of assets like Bitcoin and Ethereum since the filing.

Notably, Genesis recently reached settlements with the SEC and New York Attorney General Letitia James, addressing their objections to the bankruptcy plan. Both regulatory bodies agreed to prioritize customer repayments in their settlements. The SEC would receive a $21 million fine if any funds remain after customer repayments, and James pledged to allocate any recovered funds from the bankruptcy to creditors allegedly defrauded by Genesis.

The bankruptcy plan’s final approval is scheduled for a court hearing on February 26, where Judge Lane will weigh the merits of Genesis’s strategy and the objections raised by DCG.

Digital Assets Desk

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