Home Blockchain Grayscale and DCG Object to Genesis’ $1.6B Trust Shares Liquidation Plan

Grayscale and DCG Object to Genesis’ $1.6B Trust Shares Liquidation Plan

Grayscale and DCG Object to Genesis’ $1.6B Trust Shares Liquidation Plan

Jimmy Aki

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| 2 min read

Genesis' Trust Shares

Image by Jimmy Aki, Midjourney

On February 12, Digital Currency Group (DCG) and Grayscale raised objections to bankrupt lender Genesis’ plan to sell off its assets. This includes shares in Grayscale’s Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG), amounting to around $1.6 billion.

DCG, the bankrupt lender’s parent company, argued that Genesis’s reasons for selling the assets were unfounded.

Genesis Files For $1.6B Liquidation Plan

On February 2, defunct crypto lender Genesis submitted a motion as part of its bankruptcy proceedings. The firm requested judicial approval to sell specific trust assets valued at around $1.6 billion.

This move follows Genesis’ bankruptcy declaration last year after a series of losses and controversies affecting its parent company, Digital Currency Group.

As a result, Genesis encountered financial troubles, which led to the firm halting withdrawals in October 2022. The defunct crypto lender disclosed debts exceeding $3.5 billion to its top creditors. Some important names include Gemini and VanEck’s New Finance Income Fund.

According to the filing, Genesis’s slated assets encompass Grayscale Bitcoin Trust (GBTC) shares valued at about $1.4 billion. Additionally, shares of Grayscale Ethereum Trust total approximately $165 million, and shares of Grayscale Ethereum Classic Trust amount to roughly $38 million.

Initially, the GBTC shares involved were part of collateral Genesis transferred to Gemini for the Gemini Earn program. These were transferred alongside shares obtained through Three Arrows Capital’s bankruptcy proceedings.

Additionally, Genesis seeks to assert legal ownership over 31,180,804 extra shares (worth approximately $1.2 billion) pledged to Gemini, which still needs to be transferred. This case is currently under the court’s review.

Genesis has also filed a separate motion to expedite relevant deadlines. Ultimately, Genesis claims its objective is to maximize available funds for distribution among creditors.

Grayscale and DCG Oppose Genesis Proposal

Genesis’ intention to liquidate these assets has been met with objections from its parent company, DCG and Grayscale.

DCG subsidiary Grayscale claimed in a court filing that it only learned about the Genesis filing on February 6, 2024.

Despite this, Grayscale declared its commitment not to hinder, impede, or obstruct the Debtors’ sale or transfer of Trust Assets in accordance with relevant laws, including federal and state securities regulations.

The firm clarified that it could not be compelled to redeem shares at the Debtors’ request due to the lack of prior notification and authorization, however.

Therefore, Grayscale asked the Court to reject the part of the motion seeking to invalidate its consent rights and the requirement for authorized participation.

On the other hand, DCG contended in its filing that Genesis’s reasons for selling the assets lacked merit. The asset management firm suggested postponing asset sales until after the Debtors’ Amended Plan hearing.

If the Court favors the motion, however, DCG recommended appointing a specialized broker for the assets and advising consultation before any sales occur.

At the same time, DCG assured cooperation with the Debtors to address their concerns before the Trust Assets Sale Motion Hearing.

The investment firm further noted that considering the unreasonable time frame within which the Debtors have sought relief, they will preserve all rights, claims, defenses, and remedies.

This includes the option to supplement and amend objections, raise further concerns, and present evidence during the hearing.

Additionally, they plan to introduce pertinent documents or information supporting the objections outlined in their filing.

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