Genesis, a troubled crypto lending firm, has reportedly purchased $2.1 billion worth of Bitcoin (BTC) after selling off approximately 36 million shares of the Grayscale Bitcoin Trust (GBTC). This decision was made in an effort to repay creditors.
According to a report from Bloomberg Law, court documents filed on April 5 revealed that Genesis sold 36 million of its GBTC shares and used the proceeds to buy 32,041 Bitcoins. This move was approved by the New York bankruptcy court on Feb. 14, alongside the sale of shares from Grayscale Ethereum (ETH) trusts.
Initially seeking permission when the GBTC shares were valued at nearly $1.4 billion, Genesis’s shares in Grayscale Ethereum Trust were valued at $165 million and its shares in Grayscale Ethereum Classic Trust were valued at $38 million. However, with the recent surge in Bitcoin prices, these valuations have significantly increased. At the current Bitcoin price of around $68,000, the coins purchased with the proceeds from the GBTC shares alone are now worth nearly $2.2 billion.
The plan is to distribute these coins to Genesis’s Gemini Earn creditors as part of their repayment strategy. This development follows arguments from the Digital Currency Group (DCG), Genesis’s parent company, regarding the proposed repayment plan, which they claim would overpay lenders.
The crypto community’s response to this move has been mixed. While cryptocurrency exchange Coinbase reassured that the sell-off would likely stay within the crypto ecosystem without causing major market disruptions, concerns remain about the potential impact on GBTC and the broader crypto industry.
Genesis’s financial struggles began with the fallout of the FTX bankruptcy in late 2022, which disrupted its lending operations and put pressure on the company to repay substantial locked deposits. In response, Genesis explored various options, including hiring investment bank Moelis & Co. and announcing a 30% reduction in its workforce.
This bankruptcy filing raised questions about the stability of Grayscale Bitcoin Trust, and market observers were particularly worried about the potential liquidation of over 600,000 Bitcoins linked to the Genesis bankruptcy.
Despite these challenges, the crypto lender recently settled a lawsuit with New York Attorney General Letitia James over allegations related to its Earn program. The settlement aims to return assets to former Earn customers and other Genesis creditors, pending approval by a bankruptcy judge.
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