FTX affiliate Alameda Research filed a lawsuit against asset manager Grayscale Investments LLC for imposing a “redemption ban,” bankrupt crypto platform FTX Trading Ltd. and its affiliated debtors said Monday in a news release.
Alameda is seeking injunctive relief that the plaintiff said could unlock around $9 billion or more in value for shareholders of Grayscale Bitcoin and Ethereum Trusts and realize over a quarter billion dollars in asset value for FTX customers and creditors, FTX Debtors said.
In the news release, the FTX Debtors said that that in the past two years, Grayscale has extracted over $1.3 billion in “exorbitant” management fees in violation of the Trust agreement and “hidden behind excuses” to prevent shareholders from redeeming their shares. The FTX Debtors argued if Grayscale reduced its fees and stopped preventing redemptions, then the Debtors’ shares would be worth at least $550 million, which is 90% more than the current value.
“The lawsuit filed by Sam Bankman-Fried’s hedge fund, Alameda Research, is misguided. Grayscale has been transparent in our efforts to obtain regulatory approval to convert GBTC into an ETF — an outcome that is undoubtedly the best long-term product structure for Grayscale’s investors,“ a Grayscale spokeswoman told MarketWatch in an email. “We remain confident in the common-sense, compelling legal arguments that will be argued tomorrow before the D.C. Circuit Court of Appeals.”
FTX was one of the largest crypto trading platforms in the world before filing for bankruptcy in November 2022. Former founder and chief executive Sam Bankman-Fried is under house arrest at his parents’ home in Palo Alto, Calif.
“We will continue to use every tool we can to maximize recoveries for FTX customers and creditors,” said John J. Ray III, chief executive officer and chief restructuring officer of the FTX Debtors, in the news release. “Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban. FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions,” he said.
