Genesis filed a Motion Authorizing Sale of Trust Assets late yesterday, marking a crucial move in the aftermath of Grayscale Bitcoin Trust (GBTC) gaining approval as an exchange-traded product (ETP) on January 10th. The motion outlines Genesis’s pursuit of Bankruptcy Court authorization to monetize its holdings in key trusts, including GBTC, the Grayscale Ethereum Trust (ETHE), and the Grayscale Ethereum Classic Trust (ETCG).
To expedite the process and enable forthcoming distributions to Earn users, subject to plan confirmation, Genesis seeks approval for Gemini to monetize the Initial Collateral, comprising 30,905,782 shares of GBTC, held for the benefit of Earn users. This aligns with the information shared in updates on February 2nd and January 26th.
The expedited hearing on the motion is scheduled for February 8, 2024, at 11 am ET, underlining the urgency of the matter. Genesis aims to navigate through the legal procedures promptly and efficiently.
Ram Ahluwalia, CEO of Lumida Wealth, provided insights into the situation, stating, “Genesis wants court approval to sell its holdings in various Grayscale trusts: Bitcoin Trust (GBTC), Ethereum Trust (ETHE), and Ethereum Classic Trust (ETCG).” Ahluwalia emphasized the significance of this step in the larger context of the financial ecosystem.
Gemini’s role in the process is pivotal, seeking permission to sell the Initial Collateral, which represents a substantial number of GBTC shares. The proceeds from these sales are earmarked for distribution to Earn users but contingent upon the confirmation of the bankruptcy plan.
The motion underscores a crucial turning point in the potential recovery of funds for users participating in Gemini’s Earn program. The company’s strategic move aligns with the evolving landscape of cryptocurrency investments, providing a glimpse into the intricate balance between regulatory compliance, asset monetization, and user benefit.
The move follows Genesis reportedly agreeing to pay a $21 million civil fine to the U.S. Securities and Exchange Commission in a bid to resolve regulatory challenges surrounding the Gemini Earn program. The settlement aims to allow Genesis to shift its focus towards repaying customers and creditors without the burden of defending against SEC allegations of selling unregistered securities through its collaboration with Gemini.
While settling the dispute, Genesis did not concede any wrongdoing, as highlighted in the report. The collaboration between Genesis and Gemini, initiated in 2020, enabled Gemini customers to lend their digital assets for interest generation.
The SEC’s legal action against Genesis dates back to January 2023, shortly after the crypto lender filed for bankruptcy. The regulatory body accused Genesis of unlawfully selling securities to traders through the Earn program, allegedly earning billions of dollars in interest.
In a related development, Gemini, in January 2023, announced its intention to sue the Digital Currency Group (DCG), Genesis’s parent company, for failing to repay hundreds of millions of dollars associated with the Earn program.
Adding to the legal woes, the New York State Department of Financial Services (DFS) imposed an $8 million fine on Genesis in January 2024, citing inadequate cybersecurity measures.
Despite these challenges, Genesis is actively pursuing its customer repayment plan, aiming to secure court approval on February 14th, as outlined in the report. The repayment strategy includes settlements in both cash and crypto assets, signaling Genesis’s commitment to addressing its financial obligations amid a complex legal landscape.
Information for this briefing was found via The Daily Hodl the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.