Alameda Research, the trading branch of FTX, a bankrupt digital-asset exchange, has sued Grayscale Investments. The lawsuit claims “exorbitant management fees” and accuses Grayscale of “improperly preventing redemptions” from the Bitcoin and Ether trusts it manages.
The complaint was filed a day before oral arguments scheduled for Mar. 7 in Grayscale’s lawsuit against the US Securities and Exchange Commission. Grayscale sued after the US regulator denied its petition to convert the Bitcoin trust to an exchange-traded fund.
Lawsuit Against Grayscale Investments
Alameda Research has filed a lawsuit against Grayscale Investments, accusing it of imposing “exorbitant management fees” and “improperly preventing redemptions” from the Bitcoin and Ether trusts it manages. The lawsuit aims to unlock $9 billion or more in value for all shareholders of the two Grayscale trusts.
Grayscale’s legal battle with the US Securities and Exchange Commission (SEC) will see oral arguments on Mar. 7. Grayscale sued the regulator after it denied its petition to convert the Bitcoin trust to an exchange-traded fund. Grayscale has stated that the lawsuit is “misguided” and remains confident in the legal arguments to be made before the D.C. Court of Appeals.
Also Read: Grayscale CEO: SEC Should Approve GBTC Conversion to Bitcoin ETF(Opens in a new browser tab)
Alameda Research claims to own $290 million worth of shares in Grayscale’s Bitcoin and Ether trusts, amounting to more than 3% and 2%, respectively, of the overall float as at the end of 2022. The trading firm claims that the combined stake would rise in value to more than $540 million if Grayscale were to cut fees and allow redemptions. The lawsuit also named Digital Currency Group, its founder Barry Silbert, and current Grayscale CEO Michael Sonnenshein.
Grayscale Bitcoin Trust
The $14 billion Grayscale Bitcoin Trust (ticker GBTC) has been trading at a steep discount to the cryptocurrency it holds for two years. GBTC charges a 2% annual fee, which is high compared to the average of 0.54% across the entire US ETF universe, according to Bloomberg Intelligence data. Grayscale has stated that it isn’t allowed to redeem shares under the current guidelines.
Grayscale has faced other lawsuits, including one from hedge fund Fir Tree Capital Management and a rival digital-asset manager Osprey Funds. Osprey accused Grayscale of conducting “false and misleading advertising” for the Bitcoin trust in January. Fir Tree claimed GBTC’s retail investors had been “harmed by Grayscale’s shareholder-unfriendly actions” in a suit filed at the end of last year.
