Bankrupt Crypto Lender Genesis Dumps Grayscale Bitcoin Trust Shares, Acquires Over $2 Billion Worth of Bitcoin

Bankrupt crypto lender Genesis has sold its Grayscale Bitcoin Trust (GBTC) shares, using the proceeds to acquire 32,041 bitcoins worth approximately $2.2 billion at current market prices. The sale was completed on April 2nd, enabling Genesis to bolster its bitcoin holdings in anticipation of distributing them to Gemini Earn creditors.

Bankrupt Crypto Lender Genesis Liquidates Grayscale Bitcoin Trust Shares to Acquire 32,041 Bitcoins

In a significant transaction, bankrupt cryptocurrency lender Genesis has divested its holdings in Grayscale Bitcoin Trust (GBTC) and allocated the proceeds towards the acquisition of 32,041 bitcoins. According to court filings submitted on Friday, the sale of GBTC shares was executed on April 2.

The move garnered attention in the aftermath of Genesis's bankruptcy filing, with the company obtaining permission from a New York bankruptcy court on February 15 to sell approximately 36 million GBTC shares, alongside additional holdings in two Grayscale Ethereum trusts. At the time of filing, the estate's lawyers estimated the collective value of the Grayscale shares at approximately $1.6 billion, comprising $1.4 billion in GBTC, $165 million in Grayscale Ethereum Trust, and $38 million in Grayscale Ethereum Classic Trust.

As of today's market conditions, the bitcoins acquired through the sale of GBTC shares alone hold a value of approximately $2.2 billion, based on the current bitcoin price of approximately $67,500. While the exact plans for Genesis's substantial bitcoin acquisition remain undisclosed, initial indications suggest that the tokens will be distributed to Gemini Earn creditors.

Background and Regulatory Scrutiny

Grayscale Bitcoin Trust is a popular investment vehicle that provides investors with exposure to the price of Bitcoin without the need for direct ownership or custody. However, it has come under regulatory scrutiny due to its structure and the lack of transparency surrounding its underlying assets.

In August 2021, the Securities and Exchange Commission (SEC) rejected Grayscale's application to convert GBTC into an exchange-traded fund (ETF), citing concerns over the potential for manipulation in the underlying Bitcoin market.

Genesis Bankruptcy and Restructuring

Genesis filed for bankruptcy protection in November 2022 after suffering significant losses due to its exposure to bankrupt cryptocurrency exchange FTX. The company is currently undergoing a restructuring process and is exploring options to maximize value for its creditors.

The sale of GBTC shares and purchase of bitcoins is part of Genesis's ongoing efforts to restructure its operations and address its financial obligations. The transaction is expected to provide Genesis with additional liquidity and enhance its ability to repay creditors.

Implications for the Cryptocurrency Market

The acquisition of a significant amount of bitcoins by Genesis has potential implications for the cryptocurrency market. It could contribute to upward price pressure on Bitcoin, as the market interprets the transaction as a sign of institutional interest in the asset.

However, it is important to note that the cryptocurrency market remains highly volatile, and the value of Bitcoin can fluctuate significantly in both directions. Investors should exercise caution and conduct thorough research before making any investment decisions.