Alameda Research has decided to drop its lawsuit against Grayscale Investments, which was initiated in March 2023. The lawsuit aimed to obtain injunctive relief against alleged practices by Grayscale that were purportedly suppressing the value of FTX debtors’ assets.
The legal action brought by Alameda Research sought a court order against the charging of management fees, which were claimed to be in violation of trust agreements. These fees had reached a total of over $1.3 billion at the time the lawsuit was initially filed. Furthermore, the suit contended that Grayscale had a “self-imposed redemption ban” discouraging shareholders from redeeming shares in the Grayscale Bitcoin (GBTC) and Ethereum Trusts.
FTX, in a statement when filing the lawsuit, asserted that if Grayscale reduced its fees and ceased preventing redemptions, the shares of FTX Debtors would be valued at least $550 million—approximately 90% more than their current value: “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.”
Grayscale CEO Michael Sonnenshein said that 1.5% management fee charged for the Grayscale Bitcoin Trust is justified by “the size, the liquidity, and the track record” of the company https://t.co/l9cEzqr2F6
— Bloomberg Crypto (@crypto) January 20, 2024
The lawsuit also implicated Grayscale CEO Michael Sonnenshein, as well as the parent company Digital Currency Group (DCG) and its CEO, Barry Silbert, who resigned from the Grayscale board in December. In response to the lawsuit withdrawal, a Grayscale spokesperson, in a statement on January 22, stated, “We are pleased to confirm that Alameda Research, FTX’s affiliated hedge fund, has voluntarily dismissed its lawsuit against Grayscale. Alameda’s voluntary dismissal underscores Grayscale’s position that this legal action was entirely without merit.”
GBTC underwent conversion into a spot exchange-traded fund (ETF) after receiving approval from the United States Securities and Exchange Commission on January 10. Despite this transformation, its 1.5% management fee remains relatively high compared to its competitors. Following the conversion, GBTC has experienced significant outflows, resulting in a nearly $5 billion drop in assets under management to $23.7 billion as of January 18, contrary to the upward trend observed in most other spot Bitcoin investments.