In the most recent turn of events, the defunct cryptocurrency exchange FTX has filed (1) a lawsuit against Grayscale Investments, the largest cryptocurrency asset management in the world.
The case was filed by FTX’s sister business, Alameda Research, against FTX’s creditors to get injunctive relief for FTX debtors and realize more than $250 million in asset value.
According to the news release (2), the lawsuit was submitted by Alameda Research to the Court of Chancery in the state of Delaware.
The creditors of FTX have initiated legal action against Grayscale’s Chief Executive Officer, Michael Sonnenshein, and the company’s owners, Digital Currency Group & Barry Silbert.
In the complaint that Alameda has filed against Grayscale, the company is accused of breaking the Trust agreements’ terms by taking over $1.3 billion in “exorbitant management fees” over the past two years.
In addition to the enormous administrative costs associated with the Grayscale Bitcoin and Ethereum trusts, Grayscale let the trust shares trade at an approximate fifty percent discount while preventing the investors from redeeming them.
FTX argued the following in their lawsuit:
“For years, Grayscale has concealed itself behind various fabricated explanations to prevent owners from having the ability to redeem their shares.
As a direct consequence of Grayscale’s conduct, the Trusts’ shares are currently trading at a significant discount to their Net Asset Value of around 50 percent.
If Grayscale were to cut its costs and stop unjustly restricting redemptions, the FTX Debtors’ shares would be worth a minimum of $550 million, which is nearly 90% more than what they are worth right now.
Investors who are unable to possess units of the actual currency can nevertheless have exposure to Bitcoin through the Grayscale Bitcoin fund.
Nevertheless, because the fund’s shares cannot be exchanged for the Bitcoin that they are backed by, the price at which they trade is frequently higher or lower than the value of the company’s BTC.
Grayscale is now the company that holds the most Bitcoins belonging to a corporation, with a total of 629,900.
According to the information provided on the Grayscale website, the current value of the company’s Bitcoin assets per share is $20.29. On the other hand, the current price value of a share of Grayscale is only $11.72, which represents a significant discount of 45%.
Grayscale feels that the lawsuit is headed in the wrong direction
In response to all of the charges, Grayscale stated that the “lawsuit filed by Sam Bankman-hedge Fried’s fund, Alameda Research, is misguided.”
The manager of crypto assets continued by saying:
“In our attempts to secure regulatory clearance to convert GBTC into an ETF, Grayscale has been transparent throughout the entire process,” the company said. “This result is undoubtedly the greatest product structure for the long run.”
John Ray III, recently promoted to the chief executive officer of FTX, stated: “Our goal is to unleash value that we feel is now being repressed by Grayscale’s self-dealing and unlawful redemption restrictions.”
Customers of FTX and creditors of FTX, in addition to other Grayscale Trust investors affected by Grayscale’s activities, will benefit from any additional recovery.