Genesis Gets Approved to Sell $1.6B in Bitcoin Trust But Market Doesn't Care... Yet
Genesis has received US court approval to sell $1.6 billion in Grayscale cryptocurrency trust shares to repay creditors.
US Bankruptcy Judge Sean Lane approved the request on Wednesday, allowing the firm to sell shares of Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Grayscale Ethereum Classic Trust.
Genesis reached settlements earlier this month with the SEC and New York Attorney General Letitia James to resolve objections to its bankruptcy plan. Both the SEC and the New York Attorney General have Genesis's repayment to customers.
If Genesis has any remaining funds after repaying customers, the SEC will receive a $21 million fine. James will use any funds recovered from the bankruptcy proceedings to assist creditors who were deceived by Genesis' deposit safety promises.
The bankrupt crypto lender has 36 million shares of the Bitcoin trust, which is worth around $1.4 billion, 9 million shares of the Ethereum trust and 3 million shares of the Ethereum Classic Trust.
Genesis parent company, DCG, has argued against the bankruptcy plan's approval which it claims would overpay creditors at the expense of DCG's recovery. Lane overruled DCG's objection.
Concerns surrounding Genesis's sell-off stem from FTX. When FTX sold over $1 billion worth of GBTC holdings, Bitcoin's price plummeted from $49,000 to $39,000.
Bitcoin's price, which has now surpassed $50K, seems to be unbothered by Genesis's news for now. When Genesis actually sells its holdings, there could still be a similar impact on Bitcoin's price.
In November, Genesis sued Gemini Trust to recover funds withdrawn by customers in the bank run that led to Genesis's bankruptcy.
Genesis claimed up to 230,000 users under the "Earn investing program" withdrew $689 million from its platform in 90 days before it filed for bankruptcy.
It is also argued that US bankruptcy laws allow for the clawback of withdrawals to enable fair distribution among creditors.
Genesis borrowed assets from Earn customers and re-invested the funds to pay interest to customers. Gemini served as the custodian that processed deposits and withdrawals, earning a cut from payments by Genesis to Earn users.