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Bitcoin to the Rescue: Bankrupt Genesis Buys Crypto to Pay Creditors

Genesis liquidates GBTC shares to acquire Bitcoin for debt repayment

Bankrupt crypto lending firm Genesis has reportedly sold approximately 36 million shares of Grayscale Bitcoin Trust (GBTC) to purchase additional Bitcoin (BTC) as part of its strategy to settle outstanding debts with creditors. Bloomberg reported that the liquidation took place on April 2, with the shares valued at around $58.50 each at the time of the sale.

The share price has seen a significant increase of nearly 50% since Genesis first sought approval from the U.S. bankruptcy court to sell the shares on Feb. 2, when the price was $38.50 per share. The total proceeds from the sale amounted to $2.1 billion, enabling Genesis to acquire 32,041 Bitcoin on April 2 at a price of $65,685 per coin. The purchased Bitcoin will be used to further Genesis' efforts in repaying its creditors.

As of the time of publication, the 32,041 Bitcoin acquired by Genesis is worth approximately $2.18 billion, highlighting the potential benefits of the strategic liquidation and purchase.

Coinbase assures community of neutral market impact from GBTC sell-off

In response to concerns about the potential market impact of the Grayscale Bitcoin Trust (GBTC) sell-off, cryptocurrency exchange Coinbase recently provided assurances to the community. The exchange stated: 

"Our view is that much of these funds will likely remain within the crypto ecosystem, contributing to a neutral overall effect in the market."

Coinbase explained that under the rules of the bankruptcy plan, Genesis had the option to either convert the GBTC shares into the underlying Bitcoin asset on behalf of the creditors or sell the shares outright and distribute the cash proceeds. This flexibility in the plan suggests that the funds will likely remain within the cryptocurrency market, mitigating any significant negative impact.

However, Digital Currency Group (DCG), the parent company of Genesis, has argued that the current bankruptcy plan proposed by Genesis would result in creditors receiving

"hundreds of millions of dollars more than the full amount of their petition date claims." 

This claim, made on Feb 6, highlights the ongoing discussions surrounding the fair distribution of funds to creditors.

Genesis' bankruptcy filing in the Southern District of New York in January 2023 marked a significant event in the crypto lending space, underlining the challenges faced by companies in the industry.