Alameda Research Withdraws Lawsuit Against Grayscale Investments Amid GBTC's Fund Outflow
Summary:
Alameda Research has withdrawn its lawsuit against Grayscale Investments, first filed in March 2023. The lawsuit challenged the implementation of high management fees and a redemption ban that, Alameda alleged, undervalued the assets of FTX Debtors. Grayscale's CEO Michael Sonnenshein, parent company Digital Currency Group and its CEO Barry Silbert were also named in this dispute. Following its transformation into a spot exchange-traded fund in January, GBTC has experienced significant outflows resulting in a drop in assets under management.
Alameda Research has voluntarily dismissed its earlier lawsuit against Grayscale Investments. Initially filed in March 2023, the suit alleged attempts to devalue FTX Debtors' assets and sought to stop certain practices through court intervention. Central to Alameda Research’s claims was the violation of trust agreements through the charging of management fees, which had accrued to more than $1.3 billion when the legal action was initiated. The suit also accused Grayscale of implementing a “self-induced ban on redemption,” which discouraged investors from cashing in their shares from the Grayscale Bitcoin (GBTC) and Ethereum Trusts.
FTX argued that value of the FTX Debtors' shares could see a 90% increase, and appreciate to a worth of $550 million if Grayscale lowered its management fees and eliminated the redemption prohibition. In response, Grayscale's CEO Michael Sonnenshein defended the imposed 1.5% fee on the Grayscale Bitcoin Trust, asserting it was reasonable given the business' robustness, fluidity, and established credentials.
Sonnenshein, along with parent organization Digital Currency Group (DCG) and its CEO Barry Silbert, were named in the lawsuit. Silbert later stepped down from his position on the Grayscale board in December. In a statement relayed to Cointelegraph on January 22, a Grayscale representative announced with satisfaction that the lawsuit had been retracted by Alameda Research, FTX's associate hedge fund, further emphasizing Grayscale’s stance that the suit lacked any substantial basis.
After obtaining approval from the U.S. Securities and Exchange Commission on January 10, GBTC converted into a spot exchange-traded fund (ETF). Despite the transition, its management fee of 1.5% still stands as relatively high compared to market competitors.
Following its reclassification into a spot ETF, GBTC saw significant withdrawals leading to an approximately $5 billion reduction in assets under management to $23.7 billion on January 18. This unexpected shrinkage goes against the grain of the generally upward-moving trend that has been prevalent among other spot Bitcoin ETFs.
Published At
1/22/2024 9:47:54 PM
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