Grayscale, the world’s largest Bitcoin fund, is being sued by Alameda and FTX on behalf of FTX’s debtors and affiliates.
According to a press release released by the FTX Debtors on Monday, claims have also been filed directly against Grayscale CEO Michael Sonnenshein and Digital Currency Group (DCG) CEO Barry Silbert. Grayscale is owned by DCG.
Alameda, FTX lawsuit calls for grayscale ‘redemption ban’
Alameda’s complaint is intended to “release $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts,” a statement said.
Allowing shareholders to buy back their shares would pay off, according to FTX nearly $250 million in value for FTX clients, who have stayed high and dry since the exchange banned withdrawals in November.
Grayscale allegedly charged more than $1.3 billion in management fees in violation of trust agreements, according to the complaint.
In addition, it allegedly fabricated statements to deter shareholders from buying back their shares, resulting in a “self-imposed buyback ban,” the statement said.
As a result, the Trusts’ shares are trading “at approximately 50% off net asset value,” the statement said.
Grayscale’s battle with regulators
Grayscale is now locked in a legal dispute with the U.S. Securities and Exchange Commission over the regulator’s unwillingness to allow Grayscale to convert its fund into a Bitcoin Spot ETF.
Such a product would make shares easily redeemable and would erase the GBTC stock discount overnight.
The District of Columbia Court of Appeals will hear oral arguments on the case on March 7.
Grayscale’s Bitcoin fund is designed to provide Bitcoin exposure to those who otherwise wouldn’t be able to hold units of the actual cryptocurrency.
However, because the fund’s shares cannot be easily exchanged for their underlying Bitcoin, the shares often trade well above or below the value of the company’s BTC.
This is reported by the Financieele DagbladAlameda has 22 million shares of Grayscale’s Bitcoin Trust and 6 million shares of its Ether Trust.
Crypto total market cap at $988 billion on the daily chart | Chart: TradingView.com
Genesis Global, DCG’s lending subsidiary, filed for bankruptcy on January 19. In November 2022, withdrawals from the platform were suspended due to market turmoil caused by the collapse of FTX.
The action affected consumers of Gemini Earn, a return-earning program for users of Gemini bitcoin exchange operated by Genesis.
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