February 6, 2024

Genesis Global Capital Seeks Swift Approval for $1.6B Trust Asset Liquidation Amid Crypto Market Dynamics

Debtors of the bankrupt crypto lending firm Genesis stressed the need for fast approval to sell the shares before any potential price fluctuations.

In a move to navigate the complexities of its bankruptcy, Genesis Global Capital, the crypto lending firm, has petitioned the United States Bankruptcy Court for the green light to liquidate approximately $1.6 billion worth of shares from Grayscale's crypto trusts.

The filing underscores the urgency behind securing approval for the sale of assets within the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG). The assets, primarily comprising bitcoin, ether, and ETC, are subject to potential price fluctuations, prompting Genesis to emphasize the need for swift action to maximize funds for the benefit of creditors.

In their statement, Genesis expressed the importance of obtaining the authority to sell and liquidate the trust assets promptly. The goal is to mitigate the risk of price volatility impacting the estates of the debtors while facilitating efficient distributions to creditors.

GBTC shares dominate Genesis' portfolio, constituting about 87% of the total across the three trusts, valued at $1.38 billion. ETHE represents approximately 10% of the portfolio, totaling around $169 million, while ETHCG makes up about 3%, amounting to $38 million.

The filing highlights the significance of GBTC, revealing that as of September 2023, it held approximately 3.2% of all circulating BTC. Similarly, ETHE accounted for roughly 2.5% of circulating ETH in December 2022, and ETCG held around 8.5% of all circulating ETC.

Genesis pointed out a notable development following the United States Securities and Exchange Commission's approval on January 10. The conversion of GBTC into a spot bitcoin exchange-traded fund now enables the redemption of shares in cash through its redemption program. However, the ETH trusts lack such a program and require written consent from the sponsor to sell or dispose of the shares, a condition Genesis is seeking to have waived.

The aftermath of GBTC's conversion has witnessed a considerable exodus of investors selling their shares. Notably, on January 22, FTX, a bankrupt cryptocurrency exchange, liquidated its entire holding of 22 million GBTC shares, valued at nearly $1 billion.

Despite this trend, Genesis is determined to maximize the sale proceeds from its crypto assets. The filing emphasizes the commitment of both Genesis and Gemini to employ good faith efforts to enhance the market price of any Trust Assets or Initial GBTC Shares, ensuring optimal returns from any sale or redemption transactions.

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