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Court Approves Genesis $1.3B Grayscale Shares Liquidation

Court decision on Genesis liquidation

A bankruptcy judge has greenlit Genesis Global Holdco's plan to liquidate approximately $1.3 billion worth of Grayscale Bitcoin Trust (GBTC) shares. This decision comes as part of the company's broader strategy to reimburse its investors amidst financial restructuring. During a hearing conducted via Zoom on Feb. 14, Judge Sean Lane of the United States District Court for the Southern District of New York approved an order allowing the sale of Genesis's investments in Grayscale. 

The February court filings revealed that Genesis's portfolio included roughly $1.6 billion in shares across GBTC, Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG), with the company disclosing possession of about 35 million GBTC shares and 11 million shares of ETHE and ETCG in its bankruptcy filings.

Grayscale, on Feb. 9, filed a limited objection to Genesis's liquidation plan, asserting that the sales were "subject to written approval" by the investment firm. However, Grayscale clarified its stance, indicating it did not aim to 

"delay, impede, or obstruct the Debtors’ sale or transfer of Trust Assets." 

This judicial nod marks a pivotal chapter in Genesis's ongoing efforts to navigate its financial predicaments, offering a pathway to fulfilling obligations to its investors.

Impact of SEC approval and settlements

On Jan. 10, the SEC greenlighted the conversion of Grayscale's Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF), a move set to enhance the trading and listing of Bitcoin on U.S. exchanges. This approval, part of a broader acceptance for offerings from 10 other asset managers, is expected to streamline the redemption of shares in cash, potentially influencing Genesis's liquidation strategy positively.

Adding to the complexity of Genesis's situation, the company announced on Jan. 31 a $21 million settlement with the SEC regarding its alleged involvement in the offering and sale of unregistered securities through the Gemini Earn program. This settlement delineates Genesis's efforts to resolve regulatory challenges, distinguishing it from Genesis Global Trading. The latter entity faced an enforcement action from the New York Department of Financial Services in January.