Janice R. Andrews
Genesis Global, the insolvent cryptocurrency lender, has obtained court authority to move forward with the sale of around $1.6 billion worth of Grayscale cryptocurrency trust shares, which is a big event in the cryptocurrency space. At a court hearing in White Plains, New York, U.S. Bankruptcy Judge Sean Lane supported this critical ruling, which represents a critical milestone in Genesis’s attempts to resolve arrears with its creditors.
Genesis’s intention to sell its investments in Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Grayscale Ethereum Classic Trust is covered by the permission. Genesis aims to use its estimated 35 million bitcoin trust shares, valued at roughly $1.38 billion, and its estimated $207 million worth of ethereum trust shares, to satisfy its debt to clients and avoid paying $1.9 million in monthly fees under its trust agreements.
Judge Lane’s decision allows Genesis to carry with its liquidation plan in spite of objections from the company’s parent, Digital Currency Group (DCG), over the timing of the sale in relation to the approval of the larger bankruptcy plan.
Genesis plans to wind down its activities in accordance with its stated liquidation plan, repaying customers in cash or bitcoin, depending on the type of assets they deposited. This endeavor comes after Genesis resolved its concerns about the bankruptcy plan in recent settlements with the New York Attorney General Letitia James and the U.S. Securities & Exchange Commission (SEC).
Most importantly, in their respective agreements, the SEC and the Attorney General of New York have pledged to give Genesis consumers’ recompense top priority. Any remaining money, if any, following customer repayments would be subject to a $21 million fine to be paid to the SEC. Recovered assets would then be distributed to help creditors who were allegedly duped by Genesis’s promises of deposit security.
DCG, on the other hand, argues that Genesis’s bankruptcy plan unjustly prioritizes creditors and consumers over DCG’s ability to regain its equity ownership. DCG argues that client cryptocurrency holdings should be valued in accordance with their value at the time of Genesis’s bankruptcy filing in January 2023, within the parameters of U.S. bankruptcy law. Therefore, DCG states that no payment to a customer should be greater than the value of their cryptocurrency holdings at that point, even if assets like bitcoin and etherium have subsequently appreciated in value.
The conclusion of these discussions is awaiting Judge Lane’s evaluation of Genesis’s proposed bankruptcy on February 26. Genesis’s declaration of bankruptcy in January 2023 highlights the turbulent state of the cryptocurrency market and the difficulties facing its participants. This filing came soon after the SEC accused Genesis of selling illegal securities and suspended customer withdrawals from its Gemini Earn crypto lending program.
Judge Lane’s impending ruling will have a significant impact on Genesis’ stakeholders as well as the larger cryptocurrency ecosystem, as the business works through the intricate bankruptcy procedures. As Genesis begins this crucial stage of its reorganization journey, stay tuned for updates.
