FTX Sues 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 Bitcoin and Ethereum Trusts, which could cumulatively unlock over $9 billion for the trust’s shareholders.
Grayscale Bitcoin Stash
Per a press release from 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 will recover over $250 million in value for FTX’s clients, which have been left dry after the exchange froze withdrawals in November.
“Grays have for years hid behind contrived excuses to prevent shareholders from redeeming their shares,” FTX claimed. “Grayscale’s actions have resulted in the trusts’ shares trading at approximately a 50% discount to net asset value.”
Grayscale’s Bitcoin fund is intended to provide Bitcoin exposure to those who cannot otherwise hold units of the actual cryptocurrency. However, since shares in the fund are not readily redeemable 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 firm’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 holds 629,900 BTC, making it the largest corporate Bitcoin holder on Earth.
Unlocking Grayscale’s Bitcoin
Shades of Gray makes a profit by charging investors an annual management fee of 2%. FTX claims such “exorbitant fees” have extracted $1.3 billion from customers “in violation of the Trust Agreements.”
“If Grayscale reduced its fees and stopped improperly 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 transform its fund into a Bitcoin Spot ETF. Such a product would make shares easily redeemable, eliminating the overnight GBTC share discount.
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.
