Alameda Research, sister trading firm of the now-bankrupt FTX exchange, is suing the world’s largest Bitcoin fund on behalf of FTX debtors and affiliates.
The firm is demanding that Grayscale allow redemptions into its Bitcoin and Ethereum trusts, which could cumulatively unlock more than $9 billion for trust shareholders.
Grayscale Bitcoin Stash
For Press release Of FTX debtors on Monday, claims have also been filed directly against Grayscale CEO Michael Sonnenshein and Digital Currency Group (DCG) CEO Barry Silbert. DCG is the parent company of Grayscale.
According to FTX, allowing shareholders to redeem their shares would restore more than $250 million in value to FTX clients, who were left dry after the exchange froze withdrawals in November.
“Grayscale has hidden for years behind contrived excuses to prevent shareholders from redeeming their shares,” FTX argued. “The Grayscale shares have resulted in the shares of the trusts trading at a discount of approximately 50% of net asset value.”
Grayscale’s Bitcoin fund is intended to provide Bitcoin exposure to those who may not otherwise hold units of the actual cryptocurrency. However, since the shares of the fund cannot be easily exchanged for their underlying Bitcoin, the shares often trade well above or below the company’s BTC value.
According to the Grayscale website, the company’s Bitcoin holdings per share are worth $20.29, while the current market value per share is $11.72, a whopping 44.55% discount. In total, the company owns 629,900 BTC, making it the world’s largest corporate Bitcoin holder.
Grayscale Bitcoin Unlock
Grayscale profits by charging its investors a 2% annual management fee. FTX claims that such “exorbitant fees” have extracted $1.3 billion from clients “in violation of the Trust agreements.”
“If Grayscale lowered its fees and stopped 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.” , FTX continued.
Grayscale is currently involved in a legal battle with the Securities and Exchange Commission over the regulator’s refusal to allow Grayscale to convert its fund into a Bitcoin Spot ETF. Such a product would make the shares easily redeemable and eliminate GBTC’s share discount overnight.
FTX’s restructuring director, John Ray III, said in a statement that Grayscale’s redemption ban is “inappropriate” and hurts both FTX creditors and Grayscale investors.
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