Coinfeeds Daily → Genesis Seeks to Liquidate $1.6B Assets

Genesis Seeks to Liquidate $1.6B Assets

Published: Feb 04, 2024 | Last Updated: Feb 04, 2024
Howard Kane

Bankrupt crypto lender aims for asset sale, including $1.4B in GBTC shares, to pay creditors.

In a significant move within the cryptocurrency sector, Genesis Global Capital, a crypto lending firm that recently filed for bankruptcy, is seeking court approval to sell a substantial portion of its assets. The company has submitted a motion to the U.S. Bankruptcy Court in the Southern District of New York, aiming to liquidate approximately $1.6 billion in trust assets. This includes a notable $1.4 billion in Grayscale Bitcoin Trust (GBTC) shares, along with $165 million in Grayscale Ethereum Trust shares and $38 million in Grayscale Ethereum Classic Trust shares.

The Breakdown of Genesis's Asset Sale

Genesis's decision to sell these assets is a strategic step in its ongoing bankruptcy proceedings. The company is also attempting to reclaim an additional $1.2 billion in shares that were pledged to Gemini but have not yet been transferred. The sale of these assets, particularly the GBTC shares which constitute 87% of Genesis's total shares in the trusts, is designed to maximize the funds available for distribution to the company's creditors.

Impact of SEC Approval on the Sale

The potential sale of GBTC shares has been facilitated by a recent approval from the U.S. Securities and Exchange Commission (SEC), allowing for the conversion of GBTC to a spot Bitcoin ETF (Exchange-Traded Fund). This conversion means that the GBTC shares can now be redeemed in cash, which could significantly influence the liquidity and value Genesis can extract from this sale.

Genesis's Bankruptcy Context

The move to sell these assets comes in the wake of Genesis Global Holdco LLC and its subsidiaries, including Genesis Global Capital, LLC, filing for Chapter 11 bankruptcy protection in New York. The bankruptcy filing was a response to a tumultuous period for the crypto industry, marked by the collapse of major entities such as hedge fund Three Arrows Capital and crypto exchange FTX. Genesis Global Capital reported liabilities and assets ranging between $1 billion and $10 billion, with over $3.5 billion owed to its top 50 creditors.

It is important to note that the bankruptcy filings do not encompass all of Genesis's operations; specifically excluded are the company's derivatives, spot trading, and custody businesses. The overarching goal for Genesis is to restructure effectively and ensure that unsecured creditors are paid. Meanwhile, Digital Currency Group (DCG), which is the parent company of Genesis, plans to address its obligations to Genesis Capital as part of the restructuring process.

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