The Bankruptcy Court for the Southern District of New York granted the petition of bankrupt crypto lender Genesis Capital, which asked for permission to sell shares of the Grayscale Bitcoin Trust (GBTC) for $1.3 billion in order to pay off debts to creditors.

Cryptocurrency exchange Gemini implemented the Gemini Earn program, which allowed investors to systematically lend their Genesis assets through a tripartite agreement. Investors were guaranteed a profit at the end of a specified period, and Genesis' capital was provided in the form of loans to large companies.

Pursuant to Genesis's agreement with Gemini, approximately 60 million shares of GBTC were pledged to participants in the Gemini Earn program. However, Genesis failed to fulfill its part of the contract by refusing to pay interest to investors. Therefore, the Gemini exchange attempted to lay claim to the GBTC shares purported to be collateral for Genesis.

In October 2023, Gemini sued its former business partner Genesis. Gemini management maintains that there will be enough GBTC shares to satisfy the claims of all investors who participated in the Gemini Earn program and were affected by Genesis stopping withdrawals in 2022. Gemini asked the court that Genesis no longer control GBTC shares and could not use them to pay off obligations to any Genesis creditors involved in the bankruptcy proceedings. In turn, Genesis asked the court to allow the sale of trust assets worth $1.6 billion.

Given that Gemini’s arguments did not fully convince the court, news of the GBTC sales could theoretically undermine the dynamics of the Bitcoin exchange rate. Meanwhile, Bitcoin is growing. Crypto lender Genesis recently admitted that the Gemini Earn program offered investors unregistered securities and reached a $21 million settlement with US authorities.