The CEO of Grayscale as well as the owner of Digital Currency Group and Barry Silbert allegedly violated the trust agreement, according to the lawsuit.
Alameda Research Ltd., a hedge fund owned by former billionaire Sam Bankman-Fried, is suing Grayscale Investments, LLC, its CEO, Michael Sonnenshein, and its owners, Digital Currency Group and Barry Silbert as affiliates of FTX debt.
According to a press release announcing the lawsuit, “Debtor FTX seeks injunctive relief to unlock $9 billion or more in value to shareholders of the Grayscale Bitcoin and Ethereum Trusts (“Trusts”) and realize more than a quarter of a billion dollars in asset value to customers and creditors FTX Debtors.
The release describes how Grayscale has “extracted” more than $1.3 billion in management fees while violating the trust agreement. In addition, the complaint alleges that “Grayscale has been hiding for years behind the pretext of preventing shareholders from redeeming shares,” with the company’s actions resulting in shares trading at a 50% discount to their Net Asset Value.
“If Grayscale reduces its fees and ceases to improperly prevent redemptions,” the lawsuit states, “the FTX Debtors’ stock would be worth at least $550 million, approximately 90% more than the current value of the FTX Debtors’ stock.”
Grayscale has faced increasing pressure to make structural changes at the trust, including Valkyrie Investments which wants to take control of the trust. Grayscale CEO Michael Sonnenshein also stated in a letter to investors that if the Grayscale Bitcoin Trust fails to be converted into an exchange-traded fund (ETF), a potential move could include a tender offer of 20% of the $10.7 billion trust.
For FTX, which went bankrupt in November 2022, efforts to regain funds that can justify creditors continue.
“We will continue to use all tools possible to maximize recovery for FTX’s customers and creditors,” said John J. Ray III, CEO and Chief Restructuring Officer of Debtors FTX. oppressed by Greyscale’s own dealings and redemption bans are invalid. FTX customers and creditors will benefit from additional recovery, along with other Grayscale Trust investors who are harmed by Grayscale’s actions.