In a press release, FTX said its sister company, Alameda Research, had filed a lawsuit against Grayscale Investments, a Stamford-based cryptocurrency investment management firm. The lawsuit seeks injunctive relief to assist the FTX Debtor in realising $250 million in asset value for its creditors and clients.
Alameda’s suit also states that Grayscale charged too much for managing the Grayscale Bitcoin and Ethereum trusts. It also allowed the shares of those trusts to trade at about a 50 percent price reduction to their net asset value.
The suit claims that FTX Debtor’s shares would be worth a minimum of $550 million — nearly 90 percent more than their current value — if Grayscale decreased its fees and allowed redemptions.
1/ FTX CEO John Ray enters the ring.
FTX filed a lawsuit against Grayscale and its parent company.
This is a surprise.
John Ray is turning over every rock – including legal challenges to Grayscale’s model – to maximize recoveries for FTX creditors.https://t.co/x1xl89B0cP
— Ram Ahluwalia, crypto CFA (@ramahluwalia) March 6, 2023
Chief restructuring officer John J. Ray III said the company will use every possible means to “maximize recoveries for FTX customers and creditors.”
“Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban,” Ray said.
Ray further explained that such recoveries would benefit FTX clients and creditors and other Grayscale Trust investors harmed by Grayscale’s actions.
The case was lodged with the Delaware Court of Chancery. It names not only Grayscale’s CEO, Michael Sonnenshein, but also Grayscale’s owner, Digital Currency Group (DCG), and its CEO, Barry Silbert.
In an email to CoinDesk, a Grayscale official called the lawsuit “misguided.” They explained that the company has straightforwardly pursued regulatory approval to transform GBTC (Grayscale Bitcoin Trust) into an exchange-traded fund (ETF).
FTX’s Alameda filed a lawsuit against Grayscale accusing it of charging “exorbitant” fees and “improperly preventing redemptions” from the Bitcoin and Ether trusts it manages https://t.co/8uVntofBhO
— Bloomberg (@business) March 6, 2023
On Tuesday, the Washington, D.C. Circuit Court of Appeals will hear Grayscale’s appeal of the SEC’s decision to deny its application to convert GBTC into an ETF.
Sam Bankman-Fried, who co-founded Alameda and FTX, is facing multiple federal charges relating to the collapse of his crypto empire last year.
SBF’s clients lost a combined total of several billion dollars. He and other previous leaders at the sister companies allegedly embezzled customer monies from FTX to prop up the hedge fund during a “run on the bank” at the exchange.