In a move to address its financial challenges, troubled crypto lending firm Genesis reportedly acquired $2.1 billion worth of Bitcoin (BTC) subsequent to selling approximately 36 million shares of the Grayscale Bitcoin Trust (GBTC).
According to a recent report by Bloomberg Law, which referenced court documents filed on April 5, Genesis liquidated 36 million of its GBTC shares and utilized the proceeds to procure 32,041 Bitcoins. This strategic maneuver is aimed at repaying creditors amidst the firm’s ongoing restructuring efforts.
The decision to sell off the GBTC shares was authorized by the New York bankruptcy court on Feb. 14, along with shares from Grayscale Ethereum (ETH) trusts. Notably, Genesis sought approval for the sale when the GBTC shares were valued at nearly $1.4 billion.
Similarly, the valuation of its holdings in Grayscale Ethereum Trust stood at $165 million, while its Grayscale Ethereum Classic Trust shares were valued at $38 million. However, the recent surge in Bitcoin prices has significantly altered these valuations. At the prevailing Bitcoin price of approximately $68,000, the coins acquired from the GBTC shares alone now hold a value of nearly $2.2 billion.
Genesis intends to distribute these acquired coins to its Gemini Earn creditors as part of its repayment strategy. This development follows disputes raised by the Digital Currency Group (DCG), Genesis’s parent company, concerning the proposed repayment plan, which DCG contends would result in overpayment to lenders.
The reaction from the crypto community to Genesis’s move has been mixed. While cryptocurrency exchange Coinbase expressed confidence that the sell-off would likely remain contained within the crypto ecosystem without causing major market disruptions, apprehensions persist regarding potential repercussions on GBTC and the broader crypto industry.
Genesis’s financial woes stem from the aftermath of the FTX bankruptcy in late 2022, which disrupted its lending operations and necessitated the repayment of significant locked deposits. In response, Genesis explored various measures, including enlisting the services of investment bank Moelis & Co., and announcing a 30% reduction in its workforce.
The bankruptcy filing had reverberations for Genesis, raising concerns about the stability of Grayscale Bitcoin Trust. Market observers remained vigilant about the prospect of liquidating over 600,000 Bitcoins associated with the Genesis bankruptcy.
Amidst these challenges, the crypto lender recently reached a settlement with New York Attorney General Letitia James regarding allegations related to its Earn program. The settlement aims to restore assets to former Earn customers and other Genesis creditors, contingent upon approval by a bankruptcy judge.
