FTX is suing Grayscale to unlock $9 billion from Bitcoin and Ethereum Trusts

Alameda Research – sister trading firm of the now-bankrupt FTX exchange – is suing the world’s largest Bitcoin fund on behalf of FTX’s debtors and affiliates.

The company is demanding that Grayscale allow redemptions on its Bitcoin and Ethereum trusts, which could cumulatively unlock more than $9 billion for the trust’s shareholders.

Grayscale’s Bitcoin Stash

By a press release from the 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 repurchase their shares would return more than $250 million in value to FTX’s clients, who have been left to dry after the stock froze withdrawals in November.

“Grayscale has been hiding behind contrived excuses for years to prevent shareholders from buying back their shares,” argued FTX. “Grayscale’s actions have caused the Trusts’ shares to trade at a discount of approximately 50% to its net asset value.”

Grayscale’s Bitcoin fund aims to provide Bitcoin exposure to those who otherwise cannot hold units of the actual cryptocurrency. However, since shares of the fund cannot be easily exchanged for their underlying Bitcoin, the shares often trade well above or below the value of the company’s BTC.

According to Grayscale’s website, the company’s Bitcoin holdings are worth $20.29 per share, 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 largest corporate Bitcoin holder in the world.

Unlock Grayscale’s Bitcoin

Grayscale benefits by charging its investors a 2% annual management fee. FTX alleges that such “exorbitant fees” extracted $1.3 billion from customers “in violation of the Trust Agreements.”

“If Grayscale reduced its fees and stopped improperly preventing redemptions, the shares of the FTX Debtors would be worth at least $550 million, about 90% more than the current value of the shares of the FTX Debtors today” continued FTX.

Grayscale is currently involved in a legal battle with the Securities and Exchange Commission over the regulator’s refusal to let Grayscale transform its fund into a Bitcoin Spot ETF. Such a product would make shares easily convertible and eliminate the GBTC stock discount overnight.

FTX’s Chief Restructuring Officer, John Ray III, said in a statement that Grayscale’s redemption ban is “inappropriate” and harms both FTX creditors and Grayscale investors.

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