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 The claims issued by FTX Debtors on Monday were also 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 ‘Return Ban’
Alameda’s complaint aims to “unlock $9 billion or more in value for shareholders in the Grayscale Bitcoin and Ethereum Trusts,” according to a statement.
Allowing shareholders to redeem their shares would pay for itself, according to FTX nearly $250 million in value for FTX clients who have been left out of the water since the exchange banned withdrawals in November.
Image: TechnoPixel
According to the complaint, Grayscale allegedly billed over $1.3 billion in management fees in breach of escrow agreements.
Additionally, it allegedly fabricated statements to discourage shareholders from redeeming their shares, resulting in a “self-imposed redemption ban,” according to the statement.
As a result, the trusts’ shares are “trading at a discount of approximately 50% to net asset value,” the statement said.
Grayscale’s battle with regulators
Grayscale is now locked in litigation with the US Securities and Exchange Commission over regulators’ reluctance to allow Grayscale to convert its fund into a Bitcoin Spot ETF.
Such a product would make shares easily redeemable and wipe out the GBTC share discount overnight.
The District of Columbia Court of Appeals will hear the matter on March 7th.
Grayscale’s bitcoin fund aims to provide bitcoin exposure to those who would otherwise be unable to hold units of the actual cryptocurrency.
However, because the fund’s shares cannot be easily redeemed for the underlying bitcoin, the shares often trade well above or below the value of the company’s BTC.
According to the Financial TimesAlameda owns 22 million shares of Grayscale’s Bitcoin Trust and 6 million shares of its Ether Trust.
Crypto Total Market Cap at $988 Billion on Daily Chart | Chart: TradingView.com
Genesis Global, DCG’s lending subsidiary, filed for bankruptcy on Jan. 19. Withdrawals from the platform were suspended in November 2022 due to market turmoil triggered by the collapse of FTX.
The action impacted consumers of Gemini Earn, a high-earning program for users of the Gemini bitcoin exchange managed by Genesis.
-Featured image by TechnoPixel
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