FTX sues Grayscale to unlock $9 billion from Bitcoin and ETH trusts

While Grayscale was suing the US Securities and Exchange Commission (SEC), FTX launched another attack on Grayscale for refusing to process Bitcoin and ETH buybacks.


Alameda Research — the 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 asked Grayscale to obtain permission to repurchase the bitcoin and ethereum trust fund, potentially unlocking cumulatively more than $9 billion for the fund’s shareholders.

Grayscale’s Bitcoin repository

Complaints were also filed directly against Grayscale CEO Michael Sonnenshein and Digital Currency Group (DCG) CEO Barry Silbert, according to a press release from FTX debtors on Monday. DCG is the parent company of Grayscale.

According to FTX, allowing shareholders to repurchase shares would recoup more than $250 million in value for lost customers after the exchange froze withdrawals in November.

“For years, Grayscale has used fabricated excuses to prevent shareholders from repurchasing shares. Grayscale’s actions have caused Trusts shares to trade at approximately 50% less than net worth.”

Grayscale’s Bitcoin Fund aims to make Bitcoin accessible to those who are unable to hold physical units of the cryptocurrency. However, since the fund’s shares are not easily convertible into bitcoin, they often trade at a price above or below the value of the company’s BTC.

According to Grayscale’s website, each of the company’s Bitcoin holdings is worth $20.29, compared with the current market value of $11.72 per share — a steep discount of 44 percent and a discount of 55 percent. In total, the company holds 629,900 BTC, making it the largest Bitcoin holder on the planet.

Grayscale Unlock Bitcoin

Grayscale makes money by charging investors a 2% annual management fee. FTX claims that such “exorbitant fees” have siphoned $1.3 billion from customers and “violated fiduciary agreements.”

“If Grayscale lowered its fees and stopped preventing improper buybacks, FTX Debtor shares would be worth at least $550 million, approximately 90% more than their current value,” FTX continued.

Grayscale is currently embroiled in a legal battle with the SEC after the regulator refused to allow it to convert its funds into a bitcoin spot ETF. Such a product would make it easy to repurchase shares and quickly remove the discounted price of GBTC shares.

In a statement, John Ray III, director of restructuring at FTX, said Grayscale’s buyback ban was “untrue” and harmed FTX’s creditors and Grayscale’s investors.

  • FTX Japan Successfully Returns Over $72 Million in User Assets
  • Total assets of FTX debtors rise to $6.1 billion after deficit discovery
  • Former FTX CTO Nishad Singh pleads guilty to fraud, racketeering and money laundering

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According to CryptoPotato

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