The Genesis bankruptcy case ruling on Feb. 14 could lead to increased selling pressure and outflows for Grayscale’s GBTC.
Judge Sean Lane of the U.S. Bankruptcy Court approved Genesis, a subsidiary of Digital Currency Group (DCG), to sell shares from various Grayscale crypto products, which include its Bitcoin ETF GBTC, its Ethereum Trust (ETHE), and its Ethereum Classic Trust (ETCG).
Judge Lane’s decision enables the bankrupt lender to liquidate approximately $1.6 billion worth of 35 million GBTC shares, each valued at around $46 at the time of the ruling. Additionally, the lender can sell $182 million in ETHE and $3 million in ETCG.
The ruling also allows Genesis to coordinate with a broker of its choosing for the sales, providing the firm with the option to liquidate for Bitcoin or convert to cash. No specific deadline or timeframe was established for this process.
Furthermore, Judge Lane prohibited the parent company, DCG, from providing consultation, citing concerns about unbiased opinions regarding the GBTC shares. Nevertheless, the court found no issue with Barry Silbert’s firm initiating the request due to its vested interests.
This decision follows a previous ruling against DCG’s attempt to alter ownership during bankruptcy proceedings.
Genesis resolves legal disputes.
The troubled crypto lender reportedly resolved legal disputes in the first two months of the year.
Following a $700 million short-term loan payment from DCG, Genesis reached an agreement with New York’s Department of Financial Services, resulting in an $8 million fine and the revocation of its BitLicense, which permitted operations within the state. The lender also settled a $21 million lawsuit with the U.S. SEC related to Gemini Earn.
However, a significant lawsuit remains unresolved with New York Attorney General Letitia James. The lawsuit accuses Genesis, Gemini, DCG, and its affiliates of intricate fraud before the cryptocurrency market’s downturn in 2022. Recent filings indicate that James initially sued the entities for $1 billion, but later increased the claim to $3 billion.
