Alameda drops lawsuit against Grayscale Investments which was initiated in March 2023 for suppressing the value of assets belonging to FTX debtors.
The lawsuit alleged that certain practices employed by Grayscale were suppressing the value of assets belonging to FTX debtors.
The legal action sought a court order to halt the charging of management fees, asserting that these fees, exceeding $1.3 billion at the time of filing, violated trust agreements.
Furthermore, the lawsuit claimed that Grayscale had imposed a self-imposed redemption ban, dissuading shareholders from redeeming shares in the Grayscale Bitcoin (GBTC) and Ethereum Trusts.
The FTX firm strictly disagreed with Grayscale’s practices. They stated at the time of the filing: “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 lawsuit filing also listed the names of Michael Sonenshein, the CEO of Grayscale, CEO of Digital Currency Group (DCG) Barry Silbert, and DCG itself.
However, Silbert resigned from the Grayscale board in December of 2023 to improve the firm’s chances of seeing its spot Bitcoin ETF application approved by the SEC. He and his firm believed that his refusal to abandon his post might jeopardize the firm’s chances otherwise.
A Grayscale spokesperson stated that the firm is happy to announce that Alameda Research, the affiliated hedge fund of FTX, has voluntarily dismissed its lawsuit. The spokesperson also reiterated that the decision by Alameda emphasizes Grayscale’s position that the legal action lacked merit.
The announcement came from another development in which Bloomberg reported that FTX and Alameda Research sold over two-thirds of their Grayscale Bitcoin Trust (GBTC) shares.
The report was issued after Bloomberg cited that it confirmed from two sources familiar with the matter that FTX has indeed decided to sell their shares, generating an estimated $600 million for the FTX estate.
Before the SEC approved Grayscale to convert its Grayscale Bitcoin Tryst into a spot ETF exchange, the FTX exchange held approximately $902 million worth of shares. The total number of shares was reported to be 22.28 million shares.
Over the subsequent three days of trading, FTX sold more than two-thirds of its shares, implying a remaining holding of less than 8 million shares, now valued at approximately $281 million.
Grayscale’s GBTC Experiences $5 Billion Drop in AUM
While dismissing the lawsuit looks like a victory for Grayscale, the crypto community might not be much bothered by it, as there are other reasons why Grayscale’s name has been buzzing around the crypto universe.
The Grayscale Bitcoin Trust (GBTC) experienced heightened outflows in the initial days of trading as a spot Bitcoin exchange-traded fund (ETF), leading to a nearly $5 billion decrease in assets under management (AUM).
According to YChart and Grayscale data, the total assets of the ETF declined from $28.5 billion on January 10 to $23.7 billion on January 18. The drop in asset value can be attributed to the outflows and a 4% decrease in Bitcoin’s price over the past week, currently trading at $38,959.
The anticipated outflows from GBTC followed the approval of the ETF by the Securities and Exchange Commission on January 10, allowing GBTC holders to convert and redeem their shares for Bitcoin.
Previously, investors had to sell shares on the secondary market to exit positions. In three days, around $1.1 billion flowed out of Grayscale’s ETF as investors sought lower fees from competitors and took advantage of a narrow discount on shares.
Anthony Scaramucci, founder of SkyBridge Capital, highlighted that some GBTC investors were realizing losses and shifted to more cost-effective ETF options. GBTC carries a fee that is on the higher side at 1.5%, while other ETFs offer fees as low as 0.20%, along with six months of free investing.
CoinRoutes CEO Dave Weisberger suggested that the composition of GBTC holders, including hedgers seeking discounts and investors moving to lower fees, along with panic selling, might contribute to recent market movements.
While GBTC faces challenges as a spot ETF, other Bitcoin funds are experiencing a different trend. On the fifth trading day, spot Bitcoin ETF issuers added 10,667 BTC to their portfolios, with a net addition of approximately $440 million in Bitcoin holdings.
BlackRock’s ETF played a significant role, acquiring about 8,700 BTC valued at nearly $358 million. Excluding Grayscale, nine ETF firms collectively purchased close to 68,500 BTC since their inception, according to data from CC15Capital.
