In a bid to expedite the liquidation process and mitigate potential losses due to market fluctuations, bankrupt crypto lender Genesis Global Capital has petitioned the United States Bankruptcy Court for permission to sell approximately $1.6 billion worth of trust assets.
Urgency to Sell Trust Assets Amid Market Uncertainty
Genesis Global Capital, facing bankruptcy proceedings, has underscored the pressing need for swift approval to sell shares in prominent crypto trusts, including the Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG). The requested liquidation aims to capitalize on the current market conditions and maximize funds available for distribution to creditors.
GBTC Dominates Portfolio Holdings
With GBTC shares constituting a significant portion of Genesis’ portfolio—approximately 87%—the potential liquidation of $1.38 billion worth of GBTC shares holds paramount importance in the bankruptcy proceedings. Similarly, ETHE and ETCG shares, accounting for 10% and 3% of the portfolio respectively, contribute to the substantial liquidation value sought by Genesis.
Unique Challenges in Trust Asset Liquidation
While the recent approval from the United States Securities and Exchange Commission (SEC) facilitates the redemption of GBTC shares, Genesis faces hurdles in liquidating ETHE and ETCG shares due to the absence of a redemption program. The necessity for written consent from the trust sponsor complicates the liquidation process, prompting Genesis to request a waiver for such approval.
Market Dynamics and Previous Liquidation Events
Following the conversion of GBTC to a spot Bitcoin exchange-traded fund (ETF), notable market dynamics have emerged, with investors swiftly offloading GBTC shares. In a notable instance, bankrupt cryptocurrency exchange FTX liquidated its entire GBTC holdings, amounting to nearly $1 billion. However, Genesis aims to strategically navigate the market and maximize sale proceeds from the crypto assets in collaboration with Gemini, emphasizing concerted efforts to optimize market prices.
In conclusion, Genesis Global Capital’s pursuit of approval to liquidate $1.6 billion trust assets underscores the intricate dynamics of crypto market volatility amidst bankruptcy proceedings. The outcome of this petition will significantly impact the distribution of funds to creditors and sheds light on the complexities associated with asset liquidation in the crypto landscape.