The sale will inject considerable liquidity into Genesis at a time when it has been navigating through financial doldrums.
Genesis Receives Green Light
First reports of the approval surfaced on February 14th, when Judge Sean Lane made the announcement. The ruling enables Genesis to convert its GBTC shares into cash or Bitcoin, and the sale is expected to significantly increase Genesis’ liquidity. In order to strengthen its position even more, Genesis intends to sell off approximately 11 million shares in two Grayscale Ethereum Trusts for an additional $200 million.
Genesis, a division of Digital Currency Group (DCG), has had a difficult time following the failure of a number of significant cryptocurrency projects and players. Following the FTX collapse, the company stopped allowing users to withdraw their funds, bringing attention to the liquidity crisis that has severely hampered other cryptocurrency businesses amid one of the worst crypto winters ever. With this approval, Genesis may now manage bankruptcy procedures and stabilize its unstable financial situation.
DCG, Grayscale Opposed To Sale
Grayscale is in need of the court’s consent at this particular moment because parent firm DCG is still working on its reorganization. Grayscale has requested a delay in the sale until a decision is made on a proposed debt repayment plan, while DCG has also expressed opposition to the sale. Grayscale is worried that if the court rejects the repayment plan in its final ruling, it will be premature to move forward with the sale.
Grayscale’s objection can also be attributed to the timing of the sale. Following the successful conversion of Grayscale’s flagship GBTC fund into a spot Bitcoin ETF, the decision was made. Even though the ETF has had a lot of trading activity since its inception, its value has dropped significantly—it has lost about $6 billion.
Genesis had asked the court for permission to offload the $1.3 billion worth of shares in a filing on the 2nd of February. Approval will see Genesis offload nearly $1.6 billion worth of shares across the ETF and two trusts, Grayscale’s Ethereum Trust and Grayscale’s Ethereum Classic Trust.
SEC Settlement
In addition, Genesis consented to a $21 million settlement to resolve accusations about the Gemini Earn program with the US Securities and Exchange Commission. It has also resolved a legal dispute with New York Attorney General Letitia James concerning the Earn program. Genesis has committed to discontinue doing business in New York as part of the settlement. The New York State Department of Financial Services levied an additional $8 million fine against Genesis for noncompliance with cybersecurity and virtual currency standards.
