Grayscale’s CEO, as well as owners Digital Currency Group and Barry Silbert, allegedly breached trust agreements, according to the suit.
Alameda Research Ltd., the hedge fund owned by disgraced former billionaire Sam Bankman-Fried, is suing Grayscale Investments, LLC, its CEO, Michael Sonnenschein, and its owners, Digital Currency Group and Barry Silbert as a debtor affiliate of FTX.
According to a press release announcing the suit, “FTX Debtors are seeking injunctive relief to unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts (the “Trusts”) and to realize over a quarter of a billion dollars in asset value for FTX Debtors’ customers and creditors.”
The release describes how Grayscale “squeezed” more than $1.3 billion in management fees while violating trust agreements. The complaint further alleges that “Grayscale for years hid behind fictitious excuses to prevent shareholders from redeeming their shares,” with the firm’s actions resulting in shares trading at a 50% discount to net asset value.
“If Grayscale lowers its fees and stops improperly preventing redemptions,” the lawsuit claims, “FTX Debtors’ stock would be worth at least $550 million, roughly 90% more than FTX Debtors’ stock is currently worth today.”
Grayscale is facing increasing pressure to make structural changes to the trust, including Valkyrie Investments is looking to take the reins of trust. Grayscale CEO Michael Sonnenschein it is also said in a letter for investors that if the Grayscale Bitcoin Trust fails to become an exchange-traded fund (ETF), potential moves could include a tender offer of 20% of the $10.7 billion trust.
As for FTX which bankrupt in November 2022, the drive to re-acquire funds that could potentially fix creditors continues.
“We will continue to use every tool we can to maximize recoveries for FTX’s customers and creditors,” said John J. Ray III, Chief Executive Officer and Chief Restructuring Officer of FTX Debtors. “Our goal is to unlock value that we believe is currently suppressed by the self-service ban and improper repurchases of Grayscale. FTX’s customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors harmed by Grayscale’s actions.”
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