FTX Sues Grayscale, Digital Currency Groups

FTX Sues Grayscale, Digital Currency Groups
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Pointing out problems with investment trusts

Collapsed cryptocurrency exchange FTX and its related debtors announced today that they have filed a lawsuit against cryptocurrency manager Grayscale and related parties, represented by investment firm Alameda Research, a sister company of FTX. bottom.

It claims that there was a problem with the operation of the Bitcoin (BTC) and Ethereum (ETH) investment trusts provided by Grayscale. The debtors of Alameda and others are asking all purchasers of both mutual funds to pay more than about 1.2 trillion yen ($9 billion). The payments will free up more than ?33.9 billion ($250 million) to repay debtors’ customers and creditors.

connection: Severe shock in the virtual currency market, summary of Alameda shock and FTX turmoil

The contents of this claim are as follows.

  • Over the past two years alone, Grayscale has earned exorbitant management fees totaling around ?176.6 billion ($1.3 billion) for breaching trust agreements.
  • For years, Grayscale has blocked mutual fund redemptions for artificial reasons.
  • Grayscale’s management has allowed mutual funds to trade at discounts of around 50%.
  • If fees were cheaper and redemption was not blocked, the debtor’s stake would have been worth at least about 74.7 billion yen ($550 million).

connection: Uncertainty in the virtual currency market, the discount of the bitcoin investment trust GBTC to the lowest level ever

John J. Ray III, current CEO of FTX, said:

We intend to use all means to maximize the wealth of FTX’s customers and creditors.

The purpose of this lawsuit is to release the value suppressed by grayscale. It will benefit FTX customers and borrowers as well as other investors who buy grayscale mutual funds.

connection: Bitcoin investment trust GBTC litigation issue, proposal to eliminate negative divergence

Comments on the grayscale side

Regarding the complaint, a representative of Grayscale commented to the cryptocurrency media “The Block” as follows.

Sam Bankman-Fried’s hedge fund Alameda Research’s complaint is false.

We have managed the Bitcoin investment trust “GBTC” with high transparency in order to make it an ETF (exchange-traded fund).

connection: Grayscale Responds to SEC in Lawsuit Over Bitcoin ETF Conversion

In addition to Grayscale, the complaint also asserts claims against the following companies and persons:

  • Michael Sonnenshein CEO of Grayscale
  • Digital Currency Group (DCG), the parent company of Grayscale
  • DCG CEO Barry Silbert

What is DCG

A major cryptocurrency conglomerate. In addition to Grayscale, its subsidiaries include cryptocurrency lending company Genesis, mining-related company Foundry, and cryptocurrency media CoinDesk.

Cryptocurrency Glossary

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