Alameda seeks to ‘maximize recoveries’ in suing Grayscale over devalued BTC trust; alleges ‘exorbitant’ management fees Alameda seeks to ‘maximize recoveries’ in suing Grayscale over devalued BTC trust; alleges ‘exorbitant’ management fees
The company aims to deliver $250 million to customers through its legal case.
2 min read
Updated: Mar. 6, 2023 at 10:16 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
FTX said that its affiliate Alameda Research has sued Grayscale, as indicated in a press release published by the former company on March 6.
Alameda challenges fees, locked redemptions
In its press release, FTX alleged that Grayscale gained more than $1.3 billion from “exorbitant” management fees over two years. It also complained that Grayscale has prevented shareholders from redeeming shares of its Bitcoin and Ethereum trusts.
FTX said that shares of those funds are now trading at a roughly 50% discount. This means that each fund is worth about half of the Bitcoin or Ethereum that backs it.
The company said that if Grayscale reduced its fees, the shares owned by FTX debtors would be worth at least $550 million. This would represent a 90% increase in value.
FTX CEO John J. Ray III said that the goal of the lawsuit is to “maximize recoveries” and ultimately return funds to customers and creditors following its November bankruptcy. The case against Grayscale could deliver more than $250 million to creditors.
In its separate court filing, Alameda said that Grayscale held a total of $19 billion of assets in the relevant trusts — seemingly representing the total size of those funds, not the amount deposited by Alameda Research. Alameda aims to unlock $9 billion in value.
Other companies have sued Grayscale
Other companies have sued Grayscale for related reasons. Competing asset management firm Fir Tree Capital Management filed a similar suit on Dec. 6, 2022. That suit similarly aimed to have Grayscale reverse the discount and permit redemptions.
Another company, Osprey Funds, sued Grayscale on Jan. 30. That lawsuit concerned Grayscale’s failure to convert its Bitcoin trust to an exchange-traded fund (ETF).
Valkyrie Investments, meanwhile, proposed a rescue plan for Grayscale’s Bitcoin Trust in December. It said that it could sponsor the fund and offer redemptions. It also expressed plans to launch an opportunistic fund as a complement to Grayscale’s offering.
On Feb. 15, Grayscale Bitcoin Trust (GBTC)’s discount fell to a year-to-date low of -47.35%. Since then, the discount has risen to -44.56% — slightly closer to the baseline.
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Mike Dalton
Before transitioning to crypto writing in 2018, Mike studied library and information sciences. Currently, he resides on Canada's West Coast.
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Alameda Research
Alameda Research was once a principal trading firm, operating as an arm of the failed crypto exchange, FTX.
FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Grayscale Investments
Established in 2013 by Digital Currency Group, Grayscale Investments is a trusted authority on digital currency investing and cryptocurrency asset management.