Genesis has received approval to sell $1.6 billion worth of Grayscale Bitcoin Trust shares

A US bankruptcy judge has granted insolvent crypto trading desk and lender Genesis permission to sell $1.6 billion worth of its Grayscale Bitcoin Trust (GBTC) shares, a court filing says.

Along with the GBTC shares, Genesis will also sell its shares in Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Classic Trust (ETCG) as part of the company's plan to repay its creditors.

The approval came despite objections from Digital Currency Group, Genesis' parent company, regarding the possible premature nature of the sale in connection with the overall bankruptcy plan. DCG argued this morning that the plan would result in creditors being overpaid.

In a court filing, DCG argued that the repayment plan “disproportionately favors one small controlling group of creditors over others” and that “DCG cannot support such a plan and the court should not approve it.”

The biggest problem? According to DCG, some of the creditors will receive far more than others as the prices of digital assets such as Bitcoin (BTC) and Ethereum (ETH) have risen since Genesis' bankruptcy in January 2023.

But the judge was not convinced.

Genesis wants to use the proceeds to repay customers and avoid monthly fees associated with its escrow agreements. This development is just one part of Genesis' broader liquidation plan, which includes settlements with regulators to prioritize customer repayments. A future court hearing will consider approval of Genesis' entire bankruptcy plan on February 26.

Genesis first ran into trouble in November 2022. It was already known that the company had granted billions in loans to the insolvent hedge fund Three Arrows Capital. But as things began to fall apart for Alameda Research and FTX, things got even worse for Genesis. The company filed for Chapter 11 bankruptcy protection in January 2023.

Meanwhile, the judge's approval means GBTC will face more selling pressure after a wave of it last month. After the US Securities and Exchange Commission approved Grayscale to convert GBTC into a spot Bitcoin ETF, there was intense sell-the-news trading for a few weeks as investors sold their GBTC shares liquidated.

Source: CoinGlass

Despite the continued outflows since GBTC's conversion, the fund is by far the dominant product in the space.

Its assets under management are about four times that of BlackRock's iShares Bitcoin Trust (IBIT), which hit $5 billion just this week. This metric is significant because it means that IBIT has now doubled its fee from the original 0.12% to 0.25%.

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