Genesis, a bankrupt crypto lending firm, has recently converted approximately 36 million shares of Grayscale Bitcoin Trust (GBTC) into Bitcoin in order to settle its debts with creditors. The company liquidated the GBTC shares on April 2, generating $2.1 billion, which was used to acquire 32,041 Bitcoin. The significant Bitcoin purchase came after Coinbase assured the community that the funds from the sell-off would likely remain within the crypto ecosystem, having a neutral effect on the market. Genesis had previously reached a settlement agreement with the SEC, agreeing to pay $21 million to resolve a civil lawsuit. The SEC had filed a lawsuit against Genesis alleging the sale of unregistered securities through the Gemini Earn program.
Genesis’ decision to convert GBTC shares into Bitcoin follows a surge in the value of the shares, which had increased by approximately 50% since Genesis sought permission to sell them. The move enabled Genesis to fulfill its obligations towards creditors, with the acquired Bitcoins currently valued at approximately $2.18 billion. In a bankruptcy court filing, the company announced that it had settled with the SEC and agreed to pay $21 million to resolve the civil lawsuit. In addition, a federal judge ruled that the lawsuit against Genesis and Gemini, the parent company of Genesis, would proceed in court. The SEC’s allegations of selling unregistered securities through the Gemini Earn program were deemed plausible enough to continue with legal proceedings.
Following the sell-off of the GBTC shares and the acquisition of Bitcoin, concerns were raised about the potential impact on the crypto market. Coinbase reassured the community that the funds are likely to remain within the crypto ecosystem, minimizing any adverse effects on the market. The bankruptcy plan allowed Genesis to either convert GBTC shares into Bitcoin assets or sell the shares outright and distribute the cash to creditors. Genesis had previously suspended Gemini Earn withdrawals citing “unprecedented market turmoil” and liquidity issues following FTX’s bankruptcy. The company filed for bankruptcy after the SEC’s lawsuit was filed, and subsequently, Gemini agreed to return $1.1 billion to Gemini Earn customers as part of a settlement with New York’s financial regulator.
The decision to convert GBTC shares into Bitcoin was part of Genesis’ efforts to settle its debts with creditors and fulfill its obligations following the bankruptcy filing. The acquisition of Bitcoin worth $2.1 billion allowed the company to allocate the digital assets towards its liabilities. Despite concerns about the impact on the crypto market, Coinbase asserted that the funds were likely to remain within the crypto ecosystem. The settlement agreement reached with the SEC and the federal judge’s ruling to proceed with the lawsuit against Genesis and Gemini highlight the legal challenges faced by the companies regarding the alleged sale of unregistered securities. The ongoing legal proceedings will determine the outcome of the case and the potential implications for the crypto industry.
