Key takeaways:
- Alameda Research is suing Grayscale for a self-imposed redemption prohibition.
- Alameda Research seeks to “unlock” $9 billion in administration fees and share value that they claim to be due.
On March 6, Alameda Research stated that it had filed a lawsuit against Grayscale Investments in the Delaware Court of Chancery. The insolvent coin trading company also filed lawsuits against Barry Silbert, CEO of Grayscale’s parent company Digital Currency Group (DCG), Michael Sonnenshein, and DCG.
FTX filed for bankruptcy in November, and Alameda Research is one of its associate debtors. According to a statement, the lawsuit aims to realize over $1.25 billion in asset value for the clients and creditors of the FTX Debtors and to release $9 billion or more in value for Grayscale Bitcoin and Ethereum Trust shareholders.
According to the plaintiff, Grayscale violated trust agreements by charging more than $1.3 billion in management costs. Additionally, it “contrived excuses”—what the statement referred to as a “self-imposed redemption ban”—to prohibit shareholders from repurchasing their shares. The statement said that as a result, shares of the Trusts trade “at about a 50% reduction to Net Asset Value.” As a result, the complainant asserted:
“If Grayscale reduced its fees and stopped improperly preventing redemptions, the FTX Debtors’ shares would be worth at least $550 million, approximately 90% more than the current value of the FTX Debtors’ shares today.”
According to its self-description, the Court of Chancery serves as a forum for resolving disputes concerning the internal affairs of Delaware corporations. In December, Fir Tree Capital Management filed a lawsuit in the same court, requesting an identical set of relief.
Genesis Global, the lending division of DCG, declared insolvency on January 19. In response to the US Securities and Exchange Commission’s move to reject Grayscale’s application to establish a Bitcoin spot exchange, Grayscale has filed a lawsuit against the agency. March 7 will be the date for the District of Columbia Court of Appeals to hear oral arguments in that case. An official from Grayscale referred to the complaint as “misguided.”
To help reduce or close the discount, Grayscale has been attempting to transform its bitcoin trust into an exchange-traded fund. However, until now, the Securities and Exchange Commission has rejected spot bitcoin ETF applications from Grayscale and others because these products are susceptible to fraud and market manipulation.
Grayscale sued the SEC in June. Tuesday is the day for the District of Columbia Court of Appeals to hear oral arguments in Grayscale’s case.
