FTX Debtors and affiliate Alameda Research Ltd. have filed a lawsuit against Grayscale Investments, seeking injunctive relief to unlock $9 billion in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts. The debtors allege that “Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the trust agreements.”
FTX Debtors Accuse Grayscale of Exorbitant Management Fees and Breach of Trust Agreements
In a press release issued March 6, 2023, FTX debtors and Alameda Research, the company’s now-defunct quantitative trading firm, announced that Alameda is suing digital currency fund manager Grayscale Investments. Alameda seeks injunctive relief to allow redemptions and reduce fees associated with the Grayscale Bitcoin and Ethereum Trusts. The debtors allege that Grayscale and its management team continue to “breach trust agreements and fiduciary duties.”
Alameda also argues that Grayscale’s self-imposed redemption ban prevents the “realization of approximately $9 billion of value.” The firm’s CEO and chief restructuring officer, John J. Ray III, issued a statement regarding the lawsuit against Grayscale, stating: “We will continue to use every tool we can to maximize recoveries for FTX customers and creditors.” The FTX debtors restructuring officer added:
Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban. FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions.
The lawsuit against Grayscale follows Alameda’s lawsuit against Voyager Digital at the end of January 2023. The complaint alleged that Voyager received preferential transfers of property from Alameda Research, and the firm sought to recover approximately $445.8 million from the bankrupt entity. Voyager agreed to set aside the $445 million to pay Alameda, and both parties agreed to participate in nonbinding mediation.
The press release from FTX debtors alleges that for years, Grayscale has “hidden behind contrived excuses” to prevent shareholders from redeeming their shares. It also noted that the Bitcoin Trust (GBTC) has been trading 50% below net asset value (NAV). GBTC statistics on Tuesday show a current 42.11% discount to NAV.
“If Grayscale reduced its fees and stopped improperly preventing redemptions, the FTX debtors’ shares would be worth at least $550 million, approximately 90% more than the current value of the FTX debtors’ shares today,” the complaint against Grayscale concludes.
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