Osprey Funds sues competitor Grayscale over bitcoin trust advertising

Quick Take

  • Osprey Funds accused Grayscale of having “misleading” advertising in a complaint filed on Monday.
  • Grayscale is looking to convert one of its trusts into an exchange-traded fund, which was denied over the summer by the Securities and Exchange Commission. 
  • Osprey said Grayscale continually said “a conversion to an ETF was inevitable,” and said that was not true. 
  • A Grayscale spokeswoman called the lawsuit “frivolous.” 

Osprey Funds, which provides asset management services, accused Grayscale Investments of “unfair and deceptive acts and unfair competition."

Osprey said Grayscale’s advertisements were misleading when it said the Grayscale Bitcoin Trust (GBTC) would be converted to an exchange-traded fund, despite regulators having rejected that as a possibility, the firm said in a complaint filed in a Connecticut court on Monday. Bloomberg News first reported the legal filing.

Grayscale has sued the Securities and Exchange Commission over the agency's rejection of the company's effort to convert its GBTC product into a spot exchange-traded fund.  In a response brief, the SEC had said its rejection was “supported by substantial evidence.”  

“Grayscale launched campaign after campaign to convince participants in the markets, including their investment advisors, to engage Grayscale’s asset management services by telling them that a conversion to an ETF was inevitable, and thus Grayscale’s services would provide the only avenue offering benefits of such asset management services with access to an ETF structure,” Osprey said. “Grayscale knew that this message was false.”  

Osprey also alleged that Grayscale had been able to keep about 99.5% of the market share despite charging “more than four times the asset management fee” that Osprey itself charges because of Grayscale’s “false” advertisements. 

A Grayscale spokeswoman called the lawsuit “frivolous,” in an emailed statement. 

“The conversion of GBTC to an ETF is the best long-term product structure for Grayscale’s investors, and approval of a spot Bitcoin ETF in the United States would directly benefit our industry peers,” the spokesperson said.  

Updated with additional information. 

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