Bankrupt crypto lender Genesis Global Capital seeks court approval to sell $1.6 billion in trust assets, primarily comprising GBTC and ETHE shares, raising concerns about potential market impact and further fueling uncertainty within the crypto industry.
Streamlining Financial Restructuring
Bankrupt crypto lender Genesis Global Capital has filed a motion with the U.S. Bankruptcy Court seeking permission to liquidate $1.6 billion in trust assets, primarily made up of Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE) shares. This move highlights the ongoing financial struggles of the crypto industry and raises questions about the future of these investment vehicles.
The company filed a separate motion to expedite the process. This urgency, aiming for a hearing on February 8th, highlights Genesis’ proactive approach to streamline its financial restructuring amidst industry turmoil.
An Unresolved Dispute
At the heart of this motion lie the Grayscale Bitcoin Trust (GBTC) shares, initially part of collateral transferred to Gemini through its Earn program. However, ownership remains a contentious issue. While Genesis seeks permission to sell $1.4 billion worth of these shares, it also argues for legal entitlement to an additional $1.2 billion worth (31,180,804 shares) pledged to Gemini but never delivered. This unresolved dispute adds another layer of complexity to the already challenging situation.
The potential sale of such a large amount of GBTC shares raises concerns about impacting the market price of this popular Bitcoin investment vehicle. However, Genesis emphasizes the need to maximize value for creditors, suggesting a delicate balancing act between urgency and potential market consequences.
Selling Off Trust Assets
The court filing details Genesis’ intention to sell approximately $1.4 billion worth of GBTC shares and $165 million worth of ETHE shares. Both trusts hold underlying Bitcoin and Ethereum, respectively, but trade at a premium above their net asset value due to limited liquidity. Genesis emphasizes the urgency of obtaining approval to sell these assets before potential price fluctuations, aiming to maximize funds available for distribution to creditors.
Impact on the Crypto Market
Whether the court grants the expedited sale request and determines ownership of the disputed shares remains to be seen. This unfolding drama reflects the wider struggles of the crypto industry and the intricate legal issues surrounding digital assets.
This proposed sale could have significant implications for the cryptocurrency market. A large influx of GBTC and ETHE shares onto the market could potentially drive down their prices, impacting other Bitcoin and Ethereum-related investments. Additionally, this move further underscores the financial difficulties faced by major crypto players like Genesis, potentially fueling uncertainty within the industry.