FTX Debtors and affiliate Alameda Research Ltd. have filed a lawsuit against Grayscale Investments, seeking injunctive relief to unlock $9 billion in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts. The debtors allege that “Grayscale has extracted more than $1.3 billion in exorbitant administration fees in violation of the trust agreements.”
FTX Debtors Accuse Grayscale of Exorbitant Management Fees and Breach of Trust Agreements
in a Press release Issued on March 6, 2023, debtors from FTX and Alameda Research, the company’s now-defunct quantitative trading firm, announced that Alameda is suing digital currency fund manager Grayscale Investments. Alameda seeks injunctive relief to allow redemptions and reduce fees associated with Grayscale Bitcoin and Ethereum Trusts. The debtors allege that Grayscale and its management team continue to “violate trust agreements and fiduciary duties.”
Alameda also argues that Grayscale’s self-imposed redemption ban prevents the “realization of approximately $9 billion in value.” The company’s CEO and head of restructuring, John J. Ray III, issued a statement regarding the lawsuit against Grayscale, stating, “We will continue to use whatever tools we can to maximize recoveries for FTX customers and creditors.” FTX’s debtor restructuring officer added:
Our goal is to unlock security that we believe is currently being suppressed by Grayscale’s own trading and improper redemption ban. FTX clients and creditors will benefit from additional recoveries, along with other Grayscale Trust investors who are being hurt by Grayscale’s actions.
The lawsuit against Grayscale follows Alameda’s lawsuit against Voyager Digital in late January 2023. The lawsuit alleged that Voyager received preferential transfers of ownership from Alameda Research, and the company sought to recover approximately $445.8 million from the bankrupt entity. Voyager agreed to set aside the $445 million to pay Alameda, and both parties agreed to participate in non-binding mediation.
The FTX debtors’ press release alleges that, for years, Grayscale has “hid behind contrived excuses” to prevent shareholders from redeeming their shares. He also noted that Bitcoin Trust (GBTC) has been trading 50% below net asset value (NAV). GBTC stats for Tuesday show a current 42.11% discount to NAV.
“If Grayscale were to lower its fees and stop inappropriately preventing redemptions, FTX debtors’ shares would be worth at least $550 million, approximately 90% more than the current value of FTX debtors’ shares today.” , concludes the lawsuit against Grayscale.
What do you think will be the outcome of the lawsuit against Grayscale Investments? Share your thoughts in the comments section below.
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