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Genesis Gets Green Light: $1.3 Billion GBTC Sale Sparks Market Questions

Last Updated February 15, 2024 12:45 PM
Teuta Franjkovic
Last Updated February 15, 2024 12:45 PM
Key Takeaways
  • Genesis wins court approval to sell Grayscale shares, overcoming objections from its parent company, DCG.
  • The Court approves the sale of BTC, ETH, ETC Grayscale shares which are crucial for Genesis’ Chapter 11 restructuring.
  • Genesis plans to use the sale proceeds to repay creditors, aligning with its bankruptcy resolution strategy

Genesis Global has received court approval  to proceed with the sale of approximately 35.9 million shares of Grayscale Bitcoin Trust.

This decision  came from Judge Sean Lane of the U.S. Bankruptcy Court in White Plains, New York, who overruled the objections raised by Genesis Global’s parent company, Digital Currency Group.

Genesis Defies Parent Company, Wins GBTC Sale Approval

The ruling , issued on Wednesday, also sanctioned the sale of about 8.7 million shares of Grayscale Ethereum Trust and nearly three million shares of Grayscale Ethereum Classic Trust, marking a pivotal moment in the ongoing bankruptcy proceedings of the cryptocurrency lender.

Genesis Global recently disclosed  in a court filing that the combined value of its Grayscale shares, targeted for sale, amounted to approximately $1.6 billion as of late January.

During a court hearing, Sean O’Neal, representing Genesis, emphasized the necessity of judicial approval for the sale or transfer of these Grayscale assets.

This step is crucial as Genesis prepares for its wind-down under the Chapter 11 bankruptcy plan, with a confirmation hearing scheduled later this month. The move underscores the crypto lender’s efforts to navigate through its bankruptcy proceedings effectively.

Genesis Global has been authorized by the court to liquidate its Grayscale shares, either into Bitcoin or cash, as part of its strategy to pay back creditors under its Chapter 11 bankruptcy plan. Sean O’Neal, the attorney for Genesis, highlighted that this judicial approval is a pivotal step in adhering to the stipulations of the Chapter 11 plan.

Liquidating Shares for Creditor Repayment

However, this decision has been met with opposition from Digital Currency Group (DCG), Genesis’s parent company, which has been vocal in its objections to the Chapter 11 plan proposed by Genesis. DCG argued  in a court filing that any decisions regarding the sale of assets should be deferred until after the plan’s confirmation hearing.

They contend that the timing of the authorization, coming shortly before the confirmation hearing, is impractical. DCG pointed out that Genesis has been in possession of these shares since November 2022, suggesting there had been ample opportunity to request sale authorization sooner.

Jeffrey Saferstein, representing DCG, emphasized this point, questioning the timing and necessity of the request at this juncture.

“We’re not necessarily opposed to a sale here. But if they’re going to go forward with sales, we obviously want to make sure it’s done right,” he stated .

Genesis Global’s decision to delay seeking court approval for the sale of its Grayscale shares until after GBTC’s conversion to an exchange-traded fund (ETF) was strategic, according to O’Neal. The conversion, which occurred last month following the SEC’s approval of the country’s first Bitcoin-holding ETFs, significantly increased the value of GBTC shares. O’Neal highlighted the sharp rise in share value following the ETF conversion as a crucial factor in the timing of their request.

A Strategic Sale Amid Crypto Turmoil

However, this move faced criticism from Digital Currency Group (DCG), with attorney Jeffrey Saferstein arguing  that DCG, as the creator of GBTC and a highly knowledgeable entity regarding these assets, should be consulted before any sale of Grayscale shares. Despite DCG’s objections and claims of being the most informed party concerning these assets, Judge Sean Lane dismissed DCG’s request, pointing to an “inherent conflict.”

The court’s approval on Wednesday to proceed with the sale included 31.2 million GBTC shares, which were recently at the center of an ownership dispute that Genesis won against the crypto exchange Gemini Trust. Both Gemini and other creditors showed support for Genesis’s plea for court authorization to sell GBTC shares.

Genesis’s move to file for bankruptcy  in January 2023 came in the wake of the FTX crypto exchange collapse, marking a significant event in the ongoing challenges within the cryptocurrency industry.

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