According to a recent communication to the United States Securities and Exchange Commission (SEC), Grayscale Bitcoin Trust has terminated two deals with cryptocurrency broker Genesis.
First, Genesis will no longer assist Grayscale in the distribution and marketing of Grayscale’s shares. Second, from October 3, Genesis will no longer be an authorized participant in the fund, but will continue to serve as a liquidity provider for Grayscale. The two agreements previously entered into force in 2019.
The aforementioned responsibilities have since been transferred to Grayscale Securities LLC, a wholly owned subsidiary of Grayscale Investments LLC and an affiliate of Grayscale Bitcoin Trust. In the past, Genesis has helped Grayscale market the Fund on social media and transfer digital assets such as to create shares of the Fund.
Nevertheless, it looks like Genesis may have fallen on hard times as part of an ongoing crypto winter. Last week, the director of Genesis, Matthew Ballensweig, announced that he was retiring and moving to an advisory role. In August, Genesis CEO Michael Moro also resigned, while the company cut its workforce by 20% to cut costs.. Previously, Moro confirmed that Genesis funds were exposed to the defunct cryptocurrency hedge fund Three Arrows. Genesis’s parent company, Digital Currency Group, was forced to step in and help plug some of the losses.
Grayscale tried this year to convert his Bitcoin Trust into an exchange-traded fund so that it would not be traded on over-the-counter markets.. However, their request was denied by the SEC because the proposal failed to demonstrate how it was “designed to prevent fraudulent and manipulative acts and practices.”
In response, Grayscale CEO Michael Sonnenshein filed a lawsuit against the SEC, claiming it had “failed to apply consistent treatment to similar investment vehicles” when it rejected Grayscale Bitcoin Trust’s listing application. In part due to perceived litigation risks, GBTC shares have consistently traded below Bitcoin’s spot price value since 2021, with a discount reaching 35%, a new all-time high at press time.
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