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 issued by Debtors FTX on Friday, claims have also been submitted directly to Grayscale CEO Michael Sonnenshein and Digital Currency Group (DCG) CEO Barry Silbert. Grayscale is owned by DCG.
Alameda, FTX Lawsuit Invokes Grayscale’s ‘Redemption Ban’
The complaint by Alameda seeks to “unlock $9 billion or more for shareholders of Grayscale Bitcoin and Ethereum Trusts,” according to a statement.
Allowing shareholders to redeem shares, according to FTX, will bring them back almost $250 million in value for FTX clients, who have been left high and dry since the exchange banned withdrawals in November.
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Grayscale allegedly charged more than $1.3 billion in management fees for violating the trust agreement, according to the complaint.
Furthermore, it allegedly created an explanation to prevent shareholders from redeeming their shares, resulting in a “self-imposed prohibition on redemption,” according to the statement.
As a result, the Trusts’ shares trade “at approximately a 50% discount to their Net Asset Value,” the statement said.
Grayscale Battle With Regulators
Grayscale is now locked in a legal dispute with the US Securities and Exchange Commission over the regulator’s reluctance to allow Grayscale to convert funds into Bitcoin Spot ETFs.
The product will make the shares easily redeemable and will remove the GBTC share discount overnight.
The District of Columbia Court of Appeals will hear oral arguments on the matter on March 7.
The Grayscale Bitcoin Fund is designed to provide Bitcoin exposure to those who cannot hold actual units of the digital currency.
However, because the fund’s shares are not easily redeemable for the underlying Bitcoin, the shares often trade above or below the company’s BTC value.
According to the Financial TimesAlameda owns 22 million shares of Grayscale’s Bitcoin Trust and 6 million shares of the Ether Trust.
Crypto total market cap at $988 billion on the daily chart | Chart: TradingView.com
Genesis Global, DCG’s lending subsidiary, declared bankruptcy on January 19. Withdrawal from the platform was suspended in November 2022 due to the market turmoil triggered by the collapse of FTX.
The action affected the consumers of Gemini Earn, the earning program for users of the Gemini bitcoin exchange managed by Genesis.
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