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Genesis Acquires Over 32,000 BTC After Offloading GBTC Shares

Embattled crypto lender Genesis Global Capital has continued to ramp up efforts to pay up creditors after filing for bankruptcy protection in January 2023. As part of these efforts, Genesis has now reportedly sold off the entirety of its Grayscale GBTC holdings to acquire a substantial amount of Bitcoin in order to implement its repayment strategy. 

Genesis Converts GBTC Shares To Bitcoin In Preparation For Debt Settlement

According to a Friday report by Bloomberg Law, Genesis finalized the sale of its 36 million GBTC shares, as revealed by the company’s lawyers in a court filing on April 2. Genesis had initially received legal approval to liquidate its GBTC holdings on February 2 with each unit share valued at $38.50. However, court documents showed that the current price of GBTC as at the time of sale on April 2 was $58.50 resulting in a total sale price of $2.1 billion. 

Bloomberg’s report disclosed that the bankrupt crypto lender then used these proceeds to purchase 32,041 Bitcoin at a market price of $65,685, which will be distributed to creditors as part of its repayment plan, especially those who were previously enrolled in the Gemini Earn program. 

These recent transactions align with Genesis’s bankruptcy plan which allows the conversion of GBTC shares to either Bitcoin or direct cash for the settlement of its existing debt. Currently, the crypto lender owes $3.5 billion to creditors and will commence repayment following court approval. 

However, Genesis faces fierce opposition from its parent company, Digital Currency Group (DCG), over its proposed repayment plan. In a petition filed in February, DCG argues that its bankrupt subsidiary looks to settle creditors’ claims at amounts higher than their respective entitlement. 

DCG believes such a repayment strategy violates the Bankruptcy Code and is “unfair” since it will only benefit senior creditors who will largely gain from an appreciation in Genesis’s crypto assets value while equity holders and company stakeholders are left in unfavorable positions.

Founded in 2013, Genesis is one of the prominent crypto firms to file for bankruptcy. Its insolvency is largely linked to the sudden collapse of the defunct crypto exchange FTX.

Bitcoin Price Overview

In other news, Bitcoin gained by 2.55% in the last day to reach a price of $69,339. Such price gain would be encouraging to investors especially following the token’s overall negative performance in the past week. On higher timeframes, BTC largely remains largely bullish as anticipation continues to build ahead of the halving event on April 19.  The fourth halving in Bitcoin’s history is expected to reduce the mining reward from 6.25 BTC to 3.125 BTC.

GenesisBTC trading at $69,314 on the daily chart | Source: BTCUSDT chart on Tradingview.com

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DCG And Gemini Ink A Plan: Users To Receive All Their Crypto?

Per a report from TheBlock, Digital Currency Group (DCG) reached an agreement with crypto exchange Gemini. The two parties have been negotiating for months after the collapse of crypto lender Genesis, a DCG subsidiary, and the Gemini Earn program.

The event left thousands of users without funds, leading to several lawsuits and the destruction of the relationship between the Digital Currency Group and the trading venue. The founders of Gemini, Cameron and Tyler Winklevoss, were public about their negotiations and their objective of making their clients whole.

DCG And Gemini Could Exceed Expectations

The report claims that the partners proposed a new creditor agreement to return “all of the crypto held by the platform,” when it filed for bankruptcy protection. According to the report, the new strategy aims to compensate clients with the following strategy and methodology:

(…) all unsecured creditors a 70-90% recovery with a meaningful portion of the recovery in digital currencies.

In addition, unlike similar processes, the new agreement would allow users to benefit from a potential upside in the price of Bitcoin and Ethereum. If these cryptocurrencies rise to $85,000 for BTC and $8,500 for ETH, clients would still receive an equivalent amount.

In other words, clients will receive their funds as they were when Genesis filed for bankruptcy rather than freezing the amount in US dollars. Genesis’ parent company described the agreement as a:

(…) remarkable outcome for any liquidating chapter 11 case, let alone one in the volatile cryptocurrency industry.

TheBlock indicates that the new agreement is yet to be voted by creditors. The above clause, to allow clients to benefit from a potential crypto bull run, is aimed at incentivizing creditors to vote in favor of the proposal.

GBTC Gains Ease Recovery For Gemini Earn Users

DCG’s $630 million loan to provide respite for its subsidiary would be repaid in cash, partially, and via a financial instrument to be settled by 2025. In addition to this loan, Genesis owes over $1 billion to Gemini’s clients.

The report also notes that Genesis posted 60% of this amount as collateral as shares for the Grayscale Bitcoin Trust. The possibility of the US Securities and Exchange Commission (SEC) allowing the latter to convert into an exchange-traded fund (GBTC) has positively impacted its value.

Therefore, the discount between the GBTC and the spot price for Bitcoin has been declining and could continue to do so in the coming months for the benefit of Gemini Earn clients. The agreement stated as the report noted:

At current pricing, the Gemini User Collateral is worth approximately $607 million. If Gemini agrees to provide $100 million to Gemini Earn users under the Proposed Agreement, as it previously did, or to distribute even a small portion of the Gemini User Collateral to Gemini Earn users, there would be little doubt Gemini Earn users would receive a full recovery.

As of this writing, Bitcoin trades at $26,100 with sideways movement in the last few days.

Bitcoin Grayscale DCG Gemini

Cover image from Unsplash, chart from Tradingview