Genesis Sought Authority to Monetize $1.59 Billion in Grayscale Shares

Genesis Global Holdco and two affiliated debtors asked the U.S. Bankruptcy Court for the Southern District of New York on February 2, 2024 for authority—but not a direction—to sell or redeem approximately $1.59 billion of shares in three Grayscale cryptocurrency trusts.

The motion covered 35,939,233 shares of Grayscale Bitcoin Trust, or GBTC; 8,717,520 shares of Grayscale Ethereum Trust, or ETHE; and 2,970,892 shares of Grayscale Ethereum Classic Trust, or ETCG. Genesis said the requested flexibility would help manage price risk and facilitate eventual creditor distributions as its Chapter 11 cases approached plan confirmation.

The filing was a request, not an approved liquidation. No sale, redemption or creditor payment was authorized merely because the motion entered the docket on February 2.

A $1.59 billion estimate with a defined window

Genesis valued the three positions at $1,591,679,528.10 using January 30, 2024 market prices. The calculation comprised approximately $1.384 billion of GBTC at $38.50 per share, $169.99 million of ETHE at $19.50 per share and $38.03 million of ETCG at $12.80 per share.

Those figures were three days old when the motion was filed. They were neither February 2 closing values nor predicted sale proceeds. GBTC traded on NYSE Arca, while ETHE and ETCG traded over the counter and lacked redemption programs. Execution prices, restrictions, fees and subsequent market movements could therefore change the amount ultimately realized.

The motion also sought permission for Gemini to monetize a separate tranche of 30,905,782 GBTC shares described as the Initial GBTC Shares. That tranche was not included in the $1.59 billion table. Genesis and Gemini disputed the validity and effect of Gemini’s asserted November 16, 2022 foreclosure, so the proposal preserved their competing rights and would attach any established interest to the proceeds.

GBTC’s conversion changed the available route

GBTC had been approved for listing on NYSE Arca on January 10, 2024 and began trading there on January 11. Its conversion from a closed-end structure gave authorized participants a cash-based redemption mechanism, creating an alternative to selling a large block of shares directly into the market.

Genesis argued that timing discretion mattered because disposing of its holdings all at once could have an outsized effect on wholesale prices. The proposed guidelines contemplated consultation with creditor representatives, advance notice, established brokers and reasonable efforts to maximize proceeds. Those protections were proposals awaiting judicial approval, not evidence that market impact could be eliminated.

The debtors also requested authority to use proceeds—or cash on hand in anticipation of proceeds—to purchase bitcoin or ether. Their stated purpose was to support in-kind distributions where possible and reduce exposure to price changes during a multistep sale process. The motion did not establish which creditors would receive cryptoassets, when distributions would begin or what recovery percentage any creditor would obtain.

What the filing meant on February 2

The institutional significance was broader than a prospective securities sale. A failed crypto lender was attempting to convert large, volatile trust positions into assets suitable for a court-supervised distribution process. GBTC’s recently introduced redemption channel offered a mechanism that had not existed when Genesis entered bankruptcy on January 19, 2023.

For markets, the filing identified a potential source of substantial GBTC sales or redemptions. It did not prove that the transactions would occur immediately, that underlying bitcoin would necessarily be sold on a particular venue or that the motion caused any February 2 price movement. No market-reaction claim is made because the reviewed records do not isolate one.

Later context

On February 14, 2024, Judge Sean Lane announced approval of the requested authority; a written order followed on February 15. That later decision confirms the motion’s eventual outcome but does not alter what was knowable on February 2: Genesis had requested flexibility to monetize the positions, while execution, ownership disputes, plan confirmation and creditor recoveries remained unresolved.