The fate of Genesis Trading, Digital Currency Group (DCG) and Grayscale Bitcoin Trust (GBTC) continues to hang by a thread after Cameron Winklevoss took another step in the escalation through Gemini Get customer funds with a new open letter on Friday. However, for Grayscale, the current battle is also about continuing to fight on the front lines against the US Securities and Exchange Commission.
Craig Salm, chief legal officer (CLO) at Grayscale, revealed on Twitter thread the day that Grayscale will “soon” file the next brief in a lawsuit against the SEC, which refuses to convert Grayscale Bitcoin Trust (GBTC) into a point Bitcoin ETF.
This will close the massive discount of GBTC and remove the concern for the beleaguered DCG group. According to Salm, the case is progressing “quickly”, although the final decision time is uncertain. Oral arguments could come as early as Q2, while a final decision before the DC Circuit Court of Appeals could come in the fall.
Grayscale Remains Optimistic
In a long thread, Salm explained that Grayscale remains positive that the appeals court will approve the conversion of GBTC to spot ETFs because of “fair and equal treatment under the law.”
“This means that the events and speculations surrounding Terra/LUNA, 3AC, Celsius, Voyager, FTX, Alameda, BlockFi, Genesis Capital, Gemini, DCG, or anyone else are *not* relevant to the main question that the Court must answer,” said CLO Grayscale, which also stated that the conversion is the best solution for all GBTC shareholders.
Grayscale expects that the conversion to the spot Bitcoin ETF will remove the current discount to NAV and unlock more than $4 billion.
ETFs are the best long-term way for GBTC to track the value of Bitcoin. This is definitely the roadmap for GBTC (and ETHE and other crypto investment funds). That’s why the company’s full resources are behind this effort.
According to Salm, Grayscale has “the best lawyers” representing GBTC shareholders before the DC Circuit Court of Appeals, including Don Verrilli, former Attorney General in the Obama administration (a lawyer who represented the US government before the Supreme Court), the team at MTO, and Davis Polk.
All Options For Bitcoin Trust Are On The Table
While Salm expressed optimism, he also noted that Grayscale is exploring alternative ways to return capital to GBTC shareholders if the lawsuit against the SEC is unsuccessful.
This option includes a tender offer for a portion of GBTC shares, subject to certain relief and approval from the SEC. Although this is not the preferred goal, it may be necessary for some situations, Salm said.
Pursuing an alternative path would detract from the long-standing aspirations of the $GBTC ETF and would not be an ideal outcome, […] However, we are making this commitment to continue to prepare for all $GBTC scenarios and provide clarity to investors.
At the same time, Grayscale’s CLO points out that companies can’t just exchange shares. Anyone asking for this “doesn’t understand the complexities of securities law and tender offer rules (as opposed to Reg M).”
Despite the uncertainty around Grayscale and DCG, the price of Bitcoin experienced a rally today, which is related to the expectations for a low inflation print. Today at 8:30 am EST, US CPI data for December will be released.
At press time, BTC is up 4.5% in the last 24 hours and stands at $18,172.
Option image from CoinsCapture / Medium, Chart from TradingView.com