Benzinga - A U.S. bankruptcy court on Wednesday granted bankrupt crypto lending firm Genesis Global the go-ahead to offload approximately $1.6 billion worth of Grayscale cryptocurrency trust shares, aiming to settle debts with its creditors.
Reuters reports that the approval came from Bankruptcy Judge Sean Lane during a session in White Plains, New York, enabling Genesis to liquidate its holdings in Grayscale Bitcoin Trust (OTC: GBTC), Grayscale Ethereum (CRYPTO: ETH) Trust, and Grayscale Ethereum Classic Trust, Reuters reported.
The company possesses around 35 million shares in the Bitcoin (CRYPTO: BTC) trust, valued at roughly $1.38 billion, alongside Ethereum trust shares estimated at $207 million, as per the documents filed in court.
Genesis explained to Judge Lane that the sale of these shares is crucial for reimbursing its clients and circumventing a monthly fee of $1.9 million tied to its trust agreements.
Despite objections from Digital Currency Group (DCG), Genesis's parent entity, cautioning that the sale could be hasty without the court's nod on its comprehensive bankruptcy strategy, Lane dismissed these concerns, according to Reuters.
DCG had expressed apprehension that proceeding with the sale without securing approval for the overall bankruptcy plan might be premature.
Genesis is proceeding with a dissolution strategy that entails winding down operations and compensating its clients in cash or cryptocurrency, based on the nature of their initial deposits.
This month, Genesis reached agreements with both the U.S. Securities & Exchange Commission and New York Attorney General Letitia James, addressing their reservations about the firm's bankruptcy proposal.
These settlements have underscored the prioritization of repaying Genesis' customers.
Under the terms of the settlements, should Genesis have any residual funds post-repayment to customers, the SEC is slated to receive a $21 million penalty.
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At the same time, James has consented to allocate any recovered funds from the bankruptcy towards aiding creditors allegedly misled by Genesis's assurances of deposit safety.
DCG has contested the approval of Genesis's bankruptcy plan, arguing it unjustly favors customers and creditors at the expense of DCG's recovery prospects as an equity holder.
DCG's stance is that under U.S. bankruptcy law, the valuation of customers' cryptocurrency assets should reflect their worth when Genesis declared bankruptcy in January 2023, opposing any "additional payouts" that would cover the appreciation in assets like Bitcoin and Ethereum, Reuters reports.
Judge Lane is set to deliberate on the approval of Genesis's bankruptcy plan in a court session scheduled for Feb. 26.
Genesis' bankruptcy filing occurred in January 2023, following a lawsuit by the SEC accusing the firm of engaging in the sale of illegal securities, and a couple of months after Genesis suspended withdrawals from its Gemini Earn cryptocurrency lending service.
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