FTX Trading Arm Alameda Research Withdraws Lawsuit Against Grayscale Investments

Jimmy Aki
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Bankrupt crypto exchange FTX’s affiliate Alameda Research has withdrawn its legal action against Grayscale Investments following the conversion of its primary trust product into an exchange-traded fund (ETF).

Alameda Filing Was Entirely Without Merit

In a court filing dated January 19, Alameda Research officially announced the voluntary dismissal of its lawsuit against Grayscale Investments.

The lawsuit, initiated in March 2023 in a Delaware court, alleged that Grayscale’s management fees for overseeing the Grayscale Bitcoin and Ethereum trusts have been excessively high.

Additionally, it claimed that Grayscale had permitted the trusts’ shares to trade at a substantial 50% discount to their net asset value.

The complaint contends that if Grayscale were to lower its fees and permit redemptions, the value of FTX Debtors’ shares would rise significantly, estimated at a minimum of $550 million. This would represent an approximate 90% increase compared to their present valuation.

Meanwhile, John J. Ray III, the CEO and chief restructuring officer of the FTX Debtors, emphasized that the Alameda litigation against Grayscale aims to unlock value. This value is perceived to be currently suppressed due to Grayscale’s alleged self-dealing practices and improper restrictions on redemptions.

Although the hedge fund’s latest court filing did not explicitly state why the lawsuit was dropped, a representative of Grayscale highlighted that the dismissal reinforces the firm’s stance that the legal action was entirely without merit.

 

FTX Dumped Over $1B in Shares of GBTC as BTC Continues to Plummet

New funds introduced by major players in the financial industry, including BlackRock and Fidelity, have experienced increased investments. Concurrently, there has been a substantial withdrawal of Bitcoin, valued in billions of dollars, from the Grayscale Bitcoin Trust (GBTC).

According to a November 3, 2023 filing, FTX held 22.3 million GBTC valued at $597 million as of October 25, 2023. However, CoinDesk’s data indicates that FTX played a notable role in the outflow from GBTC.

Furthermore, FTX liquidated 22 million shares, reducing its GBTC ownership to zero, with the transaction amounting to nearly $1 billion.

Prior to the approval of GBTC, the anticipation of Bitcoin ETFs was met with high expectations. However, Bitcoin’s price has experienced a decline since its approval. This contrasts sharply with the optimistic forecasts that preceded the Securities and Exchange Commission’s (SEC) decision.

Bitcoin ETFs were envisioned as a more accessible means for the general public to invest in Bitcoin, sparking optimistic projections for the asset’s price. However, the actual outcome has been a decrease in Bitcoin’s price value.

Alameda Research
Source: CoinMarketCap BTC 7-Day Data

At press time, BTC trades at $38.88K, indicating a downtrend of 9.24% in the last seven days.

 

GBTC 1.5% Management Fees Sparks Controversies

Following approval from the United States Securities and Exchange Commission (SEC) on January 10, GBTC underwent conversion into a spot exchange-traded fund (ETF).

Despite this transformation, it maintains a relatively high 1.5% management fee compared to its competitors.

Addressing concerns raised by enthusiasts and comparisons with competitors, Michael Sonnenshein, the CEO of Grayscale, stated that the firm’s management fee is warranted by its size, liquidity, and reputation.

However, the CEO’s comment has received backlash from global crypto communities over interior motives of self-enrichment.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.