Genesis Purchases $2.1 Billion Worth of Bitcoin Following the Sale of 36 Million GBTC Shares
Genesis, a troubled crypto lending firm, has made headlines after reportedly purchasing $2.1 billion worth of Bitcoin (BTC). This comes after the company sold approximately 36 million shares of the Grayscale Bitcoin Trust (GBTC).
According to court documents filed on April 5 and cited by Bloomberg Law, Genesis sold 36 million GBTC shares and used the proceeds to buy 32,041 Bitcoins. The company intends to use these Bitcoins to repay its creditors.
The decision to sell the GBTC shares was authorized by the New York bankruptcy court on February 14, along with shares from Grayscale Ethereum (ETH) trusts. Initially, Genesis sought permission when the GBTC shares were valued at around $1.4 billion. Additionally, its shares in Grayscale Ethereum Trust were valued at $165 million, and its Grayscale Ethereum Classic Trust shares were valued at $38 million.
However, the recent surge in Bitcoin prices has significantly changed these valuations. With the current Bitcoin price at approximately $68,000, the coins purchased with the proceeds from the GBTC shares alone are now worth nearly $2.2 billion.
Genesis plans to distribute these coins to its Gemini Earn creditors as part of its repayment strategy. This development comes after arguments from the Digital Currency Group (DCG), Genesis’s parent company, regarding the proposed repayment plan, which DCG believes would overpay lenders.
The crypto community has had a mixed response to this move. While cryptocurrency exchange Coinbase reassures that the sell-off will likely remain within the crypto ecosystem without major market disruptions, concerns persist regarding the potential impact on GBTC and the broader crypto industry.
Genesis’s financial struggles can be traced back to the aftermath of the FTX bankruptcy in late 2022, which disrupted its lending operations and forced it to repay significant locked deposits. In response, Genesis has explored various options, including hiring investment bank Moelis & Co. and announcing a 30% reduction in its workforce.
The bankruptcy filing has raised questions about the stability of Grayscale Bitcoin Trust, and market observers have been wary of a potential liquidation of over 600,000 Bitcoins linked to the Genesis bankruptcy.
Despite these challenges, Genesis recently reached a settlement in a lawsuit with New York Attorney General Letitia James regarding 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.
