Genesis Global, a crypto lender that declared bankruptcy, has been given the green light by a U.S. court to sell approximately $1.6 billion worth of Grayscale cryptocurrency trust shares to repay its creditors. The approval came from U.S. Bankruptcy Judge Sean Lane during a hearing in White Plains, New York. This move allows Genesis to liquidate its holdings in Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Grayscale Ethereum Classic Trust as part of its strategy to fulfill obligations to its customers.
According to court documents, Genesis possesses around 35 million shares in the Bitcoin trust, valued at approximately $1.38 billion, and Ethereum trust shares worth about $207 million. The company argued that selling these shares is essential to repay customers and to avoid incurring monthly fees of $1.9 million related to its trust agreements.
The decision by Judge Lane came despite objections from Digital Currency Group (DCG), the parent company of Genesis, which expressed concerns that the sale could be premature without the court’s approval of Genesis’s comprehensive bankruptcy plan. Genesis is proceeding with a liquidation plan aimed at discontinuing its operations and reimbursing customers in cash or cryptocurrency, depending on the type of currency deposited by them.
Earlier this month, Genesis reached agreements with the U.S. Securities & Exchange Commission (SEC) and New York Attorney General Letitia James, which resolved their objections to the bankruptcy plan. Both the SEC and the New York Attorney General have agreed to prioritize the repayment of Genesis customers. The SEC is set to receive a $21 million fine if Genesis has surplus funds after customer repayments, and James has consented to allocate any recovered funds from the bankruptcy towards aiding creditors allegedly misled by Genesis regarding the security of their deposits.
DCG has contested the bankruptcy plan, arguing that it unfairly favors customers and creditors at DCG’s expense as an equity holder. DCG contends that under U.S. bankruptcy law, Genesis must base the valuation of customers’ crypto holdings on their worth at the time of the bankruptcy filing in January 2023, opposing the plan’s provision for “additional payouts” to reflect the rising value of assets like Bitcoin and Ethereum.
Judge Lane is scheduled to deliberate on the approval of Genesis’s bankruptcy plan in a court hearing on February 26. Genesis’s bankruptcy filing in January 2023 followed a lawsuit by the SEC for allegedly selling unregistered securities and came two months after Genesis halted withdrawals from its Gemini Earn crypto lending program.
