February 15, 2024

Genesis Granted Court Approval to Liquidate $1.3 Billion in GBTC Shares

Genesis Global has secured court approval to sell approximately 35 million shares of the Grayscale Bitcoin Trust (GBTC), valued at over $1.3 billion.

Genesis Global has obtained approval from a bankruptcy court to divest approximately 35 million shares of the Grayscale Bitcoin Trust (GBTC), valued at over $1.3 billion, as reported by Bloomberg News.

This decision, presided over by Judge Sean Lane, greenlights Genesis to convert its GBTC shares into bitcoin or cash, thereby infusing significant liquidity into the company as it maneuvers through financial intricacies.

In addition to this sizable transaction, Genesis is poised to offload more than 11 million shares from the Grayscale Ethereum Trust and the Grayscale Ethereum Classic Trust, further fortifying its asset portfolio with an infusion of over $200 million.

As a subsidiary of the Digital Currency Group (DCG), Genesis has faced formidable challenges in the wake of major collapses within the cryptocurrency sector. The recent suspension of user withdrawals following the FTX incident underscored the liquidity constraints that have afflicted numerous crypto firms during a challenging market phase dubbed the 'crypto winter'.

The court's approval marks a pivotal milestone for Genesis, aiding the company in navigating through bankruptcy proceedings and stabilizing its financial standing.

This ruling arrives at a critical moment for Genesis, amidst broader financial maneuvers and restructuring initiatives within its parent company, DCG.

Although DCG and Grayscale expressed opposition to the sale, preferring to delay until a final decision was made on a proposed debt repayment plan, the court's decision provides a forward path for Genesis and DCG amid ongoing financial realignments.

This development follows the successful transition of Grayscale's flagship GBTC fund into a spot bitcoin ETF. Despite the ETF's significant trading volume since its recent launch, its size has dropped significantly by more than $6 billion.

Grayscale Bitcoin Trust (GBTC)

In addition to liquidating assets, Genesis recently reached a $21 million settlement with the Securities and Exchange Commission (SEC) over allegations concerning its Gemini Earn program.

Genesis has also settled a lawsuit brought forth by New York Attorney General Letitia James, resolving accusations of investor fraud related to its Earn program. As part of the settlement, Genesis has agreed to cease operations in New York.

Furthermore, Genesis incurred an $8 million fine from the New York State Department of Financial Services (DFS) for compliance lapses that violated DFS' virtual currency and cybersecurity regulations, leaving the company susceptible to illicit activities and cybersecurity threats.

Another major lawsuit remains pending with New York Attorney General Letitia James. The suit alleges convoluted fraud by Genesis, Gemini, DCG, and its affiliates before crypto’s 2022 contagion. According to recent filings, James initially sued the entities for $1 billion, but this figure was raised to $3 billion.

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