Genesis Bankrupt to Liquidate BTC Trust Shares Worth $1 Billion

Genesis, the once popular cryptocurrency lending company, has filed for bankruptcy [and is now trying to sell shares from the Grayscale Bitcoin Trust (GBTC) valued at over $1 billion. The decision has rocked the cryptocurrency industry, prompting concerns about what will happen to these sizable holdings and how they will affect the market as a whole.

With this special arrangement, customers can earn income on their cryptocurrency holdings, with shares of GBTC serving as vital collateral. The choice to sell these shares was made while Genesis was having financial difficulties, which could impact users registered in Gemini’s Earn program.

According to the proposed settlement plan, Genesis and 3AC is expected to drop the rest of liabilities, as contained in the Settlement Agreement. According to Genesis, the $1 billion 3AC claim against Genesis is the biggest recorded claim in any Chapter 11-related cases, which is also linked to the collapse of the defunct FTX exchange.

Origin of Genesis’s BTC Trust Shares Revealed, Investors Feel Apprehensive

A portion of these Gemini’s Earn program shares were purchased after the demise of Three Arrows Capital, a significant participant in the cryptocurrency investing market. Julius Mutunkei from CoinGape revealed that the future of these assets is unknown due to Genesis’s bankruptcy; including these shares in Genesis’s holdings raises concerns regarding industry risk management and due diligence procedures.

The demise of Three Arrows Capital, which followed market volatility, is now linked to Genesis’s situation and its substantial Grayscale BTC holdings. Genesis’s claim to an extra 31.2 million GBTC shares, valued at around $1.2 billion, adds another level of intricacy.

This claim may be debated during the bankruptcy process when questions about these shares’ genuine ownership and legality are raised. It is believed that the possible sale of these extra GBTC shares would have an even greater effect on the already vulnerable equilibrium in the GBTC market.

Investors Risks Losing Portion of Their Shares, Market Reaction Expected 

Investors who used GBTC shares as collateral to participate in Gemini’s Earn program risk having their holdings disrupted and maybe losing money. A court filing on November  9 says that the 3AC debtor is entitled to general unprotected claims against the bankrupt Genesis, which they say amounts to $33 million.

The total amount is recorded at 3.3% of a little over $1 billion, initially meant for Genesis debtors. The said bankruptcy settlement agreement was filed at the Southern District’s United States Bankruptcy Court, New York, with Judge Sean Lane in charge of its approval.

However, creditors were given up to November 24 to object to this settlement prior to the hearing, which took place on November 29. This development is almost a year anniversary of the defunct FTX exchange demise, whose unfortunate outcome threw the rest of the cryptocurrency industry into a severe bearish situation. 

Genesis  to Restrict Digital Currency Group from Taking Certain Actions 

The company has been in the process of relieving its major quantity of Grayscale BTC since December 2023. The shares, which amount to 3.2% of all the BTC in circulation, have noticeable implications for the bigger market. Some of the set plans for the proposed liquidation include acquiring the assets linked to Ethereum Classic (ETC) and Ether (ETH). 

It was also disclosed that Genesis won a bid to restrict Digital Currency Group (DCG) (which also their parent company) from decreasing or selling off ownership in the company. This is expected to remain so until the Chapter 11 proceedings are formally finalized as part of the actions that come with changing the ownership, which, according to the court order in December, Genesis is looking to protect some tax benefits. 

The report says that the advantage of this arrangement is only applicable if Genesis maintains its position as part of the tax-consolidated group. It was also declared that Genesis might lose its benefits, worth $700 million, if the ownership of the DCG goes below 80%.

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